Paul A Thomas wrote:
- quote -

It is my understanding that recording this year
reimbursements (of prior years expense) as income is
dependent only on the prior years expense having been
claimed as a deduction. Itemizing, or not, in year 2 is not
a consideration. There is usually a worksheet for this in
the 1040 instructions.

dick w

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ge wrote:
- quote -

Doing "that", trading a deduction in one year for income in
the following year, is generally a bad idea. Another
deduction for 2004 reduces your taxes at the effective tax
rate after all other deductions, adding to your AGI in 2005
is taxed at your highest effective rate. And increasing
your AGI increases a number of limits, etc. Anyones coming
out ahead on such a trade is often dependent on the
following year's income/deductions/... being radically
different from the 1st year's.

Calculate your taxes for 2004 and estimated 2005 two ways
(BEFORE filing your 2004 return!):

1st, with the additional deduction in 2004 and income in
2005.

2nd without the additional deduction in 2004 and without the
additional income in 2005 (since in this case the
reimbursement is not for a deduction claimed, it is not
taxable).

Then make a choice as to what you want to file.

You need to do the math to understand your particular case.
Even if the amount involved is small, do the math - seeing
the numbers, learning the principals, will apply year after
year.

btw, you wrote "expect our (covered) medical expenses to
exceed the deductible". I've no idea what you are saying -
medical expense that you are reimbursed for has, to the best
of my non-professional knowledge, nothing to do with
deductable limits.

dick w

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"ge" <e_c_l_e_s[at]a-znet.com> wrote

- quote -

Reimbursements received within the year would work to reduce
your current year expense. The only reason I see for a Line
21 entry is in case you didn't itemize in year 2, but
received a reimbursement from a year 1 expense that you did
deduct.

- quote -

Nope.

- quote -

It happens often I'm sure.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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Paul A Thomas" <taxman[at]negia.net> wrote:
- quote -

OK, I'll do that. But, it raises a couple of questions:

1. In a 'normal' situation - where we pay the provider, and are
reimbursed by our insurance in the same year - should the
reimbursement be applied to reduce the deductible expense, or
as 'other income'? I had thought, the former.

2. Shouldn't we get a 1099 or something? We keep good track of
these things, but it's a lot of effort. It seems like you
could take the deduction for the expense, and then just
'forget' to count the reimbursement as income.

Thanks,
George

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ge wrote:

- quote -

Yes. The misc/other income line.

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"ge" <e_c_l_e_s[at]a-znet.com> wrote

- quote -

Yes, Line 21 as "Other Income".

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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In December, we paid a medical bill (COD, more or less).
Now, in Jan '05, we were reimbursed by our insurance. For
'04, we will be itemizing (we have substantial medical
expenses). For '05, we have some expectation that we won't
itemize. If it matters, we have an HSA for '05, and expect
our (covered) medical expenses to exceed the deductible, and
to have additional uncovered expenses.

WRT that one bill (paid in '04, reimbursed in '05): As far
as I can tell, we can claim that as a medical expense on our
'04 return (?). If we did that, I assume we'd have to add it
in somewhere on our '05 return, but I don't see where.
Would it just be 'other income'?

TIA,
George

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