This month I want to touch upon several items. I have been asked to return to the Board of Directors of the Drug and Alcohol Testing Industry Association on an Interim basis. I had previously been on the Board some fifteen years ago, back in 2003. Due to circumstances, I am filling a position that was vacated but is necessary for the Association to continue. So, once again, if you have any questions regarding drug and/or alcohol testing, you again have your own advocate to write to at 10-4 Magazine.
In the “What’s New at NTA” category, we are now offering pet insurance for the companion that travels with you, or the one who greets you when you get home. There are about 3.5 million professional drivers in the United States. Of those drivers, 62% have pets and 40% of those drivers take their pets with them on the road. These drivers can get their cake and ice cream as they get the companionship they want, along with a write-off for a watch dog while they are sleeping. Since success in the trucking industry is measured in nickels and dimes, you have to really make sure the wheels keep rolling to make a dollar.
So, what do you do if your pet gets sick on the road or in a strange town? You need a flexible pet insurance plan, and we have it. One plan features four different annual deductibles to choose from – $100, $150, $250 or $500 – while another plan allows you to select how much money you will get reimbursed – 70%, 80% or 90% of vet bills. There is also a plan that allows you to keep your own vet. And, finally, there is an opportunity to get 10% group discounts, a 5% paperless discount and a 10% multi-pet discount (in states that allow). That could be a 25% discount!
Another new benefit at NTA is the addition of yet another “Cadillac” health plan. Our newest provider, CieloStar Private Exchange, has been around for 30 years without any complaints. This organization offers numerous benefits to businesses providing benefits for employers – chamber organizations, brokers, and associations – allowing them to bring a private exchange to their member companies and the employees of those member companies. CieloStar has six minimum essential coverage health plans required by law, and prices start at just $63, which is a far cry from the IRS penalty for tax year 2017 (2.5% of your total household adjusted gross income, or $695 per adult and $347.50 per child, up to a maximum of $2,085). Once again, you have the flexibility to upgrade the quality of your coverage from three Bronze plans, three Silver plans, three Gold plans and three Platinum plans.
Now for some good news regarding taxes. Late last year, the President signed the most sweeping tax overhaul in years. This is simply the results of putting a businessman in the White House, no matter how many times he says something stupid on Twitter. The Act’s final version retained the itemized deduction for medical expenses, even though the original House version would have done away with this deduction altogether. But, the medical deduction was not just retained, its adjusted gross income (AGI) floor was lowered from 10% to 7.5% for 2017 and 2018 (after which it returns to 10%). The AGI floor is meant to eliminate deductions for minor medical costs by only allowing those that are in excess of the given percentage of your AGI.
To better understand this deduction, here is an example. You have wages of $100,000 for 2018 and no other income, losses or adjustments, so your AGI for the year is $100,000. In this case, for the year, the first $7,500 (7.5% of $100,000) of your otherwise deductible medical expenses is not deductible. Thus, if you have $8,000 of medical expenses, only $500 ($8,000 minus $7,500) is deductible. If you have the same amount of income and medical expenses in 2019, none of your medical costs will be deductible because of the 10% floor (10% of a $100,000 AGI is $10,000 which is greater than the $8,000 of medical expenses you incurred in our example). Of course, there’s always a chance that Congress will extend the reduced 7.5% floor beyond 2018, but you shouldn’t count on it.
Here is where it gets a little complicated. Because medical deductions are itemized, to get any benefit from them, your itemized deductions must exceed the new standard deduction, which is $24,000 for a married couple filing jointly (or for a surviving spouse with a dependent child), $18,000 for a head of household and $12,000 for anyone else. Retaining the medical deduction is a necessity for the families of disabled individuals and for senior citizens who require extraordinary care. Without this deduction, those groups could have been saddled with enormous medical costs without any tax relief. However, this deduction is not just for disabled individuals, senior citizens and their families.
One strategy that works well for itemized deductions is to “bunch” deductions, which means paying as much of your medical expenses as possible, in a single year, so that the total will exceed the AGI floor and your overall itemized deductions will exceed the standard deduction. For example, if your child is having some orthodontic work that will cost a total of $12,000 and the dentist offers a payment plan, making those smaller payments over several years may not allow you to exceed the medical AGI floor in any given year. However, by paying all at once, if possible, you will exceed the floor and get a deduction.
Being aware of medical deductions is key. Unreimbursed costs such as those from doctors, dentists, hospitals and medical insurance premiums are deductible. Under certain circumstances, you may even be able to deduct the medical expenses that you pay for others. If you have a dependent (a qualified child or other relative) either at the time the medical services were provided or at the time the expenses were paid, those expenses may be deductible. A child of divorced parents is considered a dependent of both parents, for the purpose of medical expenses, so each parent can deduct the medical costs that he or she pays for the child.
Many of the new tax changes, which favor businesses, are permanent, while others benefiting individual taxpayers are “temporary” for now. These temporary changes include reducing the top individual tax rate from 39.6 to 37%, nearly doubling the standard deduction of $12,000 for an individual and $24,000 for married taxpayers filing jointly and doubling the child tax credit. A good reason to incorporate is that the tax rate will go down from 35% to 21%. Another reason to consider incorporating is because the equipment you buy is now 100% deductible under the revised depreciation rules. Clearly, there is a lot to consider.
Being informed is vital, and you must constantly keep up on these things. If you have questions or want to learn more about the topics discussed here, visit www.ntassoc.com or call me at (562) 279-0557. Until next month, “Drive Safe – Drive Smart!”