To make the aforementioned election to claim a federal income tax deduction for unpaid medical expenses on the decedent’s final Form 1040, the executor must waive the right to count those unpaid medical bills as liabilities on the decedent’s federal estate tax return (Form 706). (If the election is missed, it can be made on an amended final return using Form 1040X.) The election to deduct unpaid medical expenses on the decedent’s final Form 1040 is made by attaching a statement, in duplicate, to the final return. 1 through the date of death (including unpaid medical expenses for which the aforementioned election is made) plus the surviving spouse’s income and deductions for the entire year. In this case, the final joint return will include the decedent’s income and deductions from Jan. When there is a surviving spouse, the final Form 1040 can be a joint return filed by the surviving spouse (as if the decedent was still alive as of the end of the year of death). However, if the executor makes the aforementioned election, a deduction can also be claimed on the final return for medical expenses that are paid within 12 months after death. If the decedent was unmarried, the final Form 1040 includes income collected through the date of death and deductible expenses paid through that date. The final return is due by the normal deadline, which is generally Apfor a person who dies in 2015 (unless the final return is extended to Oct. The decedent’s final Form 1040 covers the period from Jan. Read: You may be exposed to estate taxes without realizing it The sad truth is final medical expenses can easily surpass these deduction thresholds-especially when death occurs relatively early in the year before the decedent had collected much income. Remember, however that medical expenses can only be deducted to the extent they exceed 10% of the amount of adjusted gross income (AGI) reported on the final Form 1040, or 7.5% of AGI if the decedent was 65 or older. This allows those expenses to be deducted on the decedent’s final Form 1040, even though they were not paid on the date of death. But what happens when a person (the decedent) incurs medical expenses and dies before they are paid? Good question.įor federal income tax purposes, the executor of the decedent’s estate can elect to treat medical expenses paid by the estate during the one-year period that begins on the day after the date of death as if those expenses were paid when incurred. For federal income tax purposes, deductions for unreimbursed medical expenses (those not covered by insurance) are normally allowed only in the return for the year in which the expenses are actually paid.
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