Savings Bond interest exclusion for seniors

[StevenL]

I think I know the answer to my question already but I figured I would put it on here and see if anyone with more knowledge than me would have a different answer.

Any how, here goes: I have a senior citizen client (85 years old) in need of constant medical care. Last year she cashed in all of her savings bonds to the tune of $86,000 in interest to help pay her medical expenses (which only totaled $26,000). Is there anyway she can exclude all or some of the  income on her  tax return? If not she she will have a hefty tax bill to deal with. 

Thanks for your help.

[NECPA in NEBRASKA]

Unless she had more medical expenses, I don't know how she could exclude any of the interest income for a federal return. I know that there are some bonds that you pay tax on the interest annually, but it doesn't sound like these are those kinds of bonds.

 

[Lion EA]

Are you sure that's all her medical expenses?  My elderly clients with round-the-clock care plus co-pays and deductibles and insurance premiums and ... spend about $175,000 per year.

Also, has she been paying tax each year on her savings bonds, or did she pay when they matured, so that none or only some of the $86,000 is taxable for 2016?

[RitaB]

11 hours ago, StevenL said:

Any how, here goes: I have a senior citizen client (85 years old) in need of constant medical care. Last year she cashed in all of her savings bonds to the tune of $86,000 in interest to help pay her medical expenses (which only totaled $26,000). Is there anyway she can exclude all or some of the  income on her  tax return?

No, there is no savings bond interest exclusion for medical expenses.

[StevenL]

8 hours ago, Lion EA said:

Are you sure that's all her medical expenses?  My elderly clients with round-the-clock care plus co-pays and deductibles and insurance premiums and ... spend about $175,000 per year.

Also, has she been paying tax each year on her savings bonds, or did she pay when they matured, so that none or only some of the $86,000 is taxable for 2016?

Her daughter is handling her finances for her. She said the $26,000 was what she had for medical expenses. I will have double check, with her,  but it is consistent to what she's had in the past. 

All this interest was reported on 1099-INT box 3 so with no medical or senior citizen exclusion it looks like she'll have to pay.

Thanks everyone for your help.

[Terry D EA]

Don't mean to be insensitive but another case of folks making decisions and acting on them without consulting their tax advisor or accountant.

[RitaB]

On ‎3‎/‎4‎/‎2017 at 8:44 PM, StevenL said:

Any how, here goes: I have a senior citizen client (85 years old) in need of constant medical care. Last year she cashed in all of her savings bonds to the tune of $86,000 in interest to help pay her medical expenses (which only totaled $26,000).

 

On ‎3‎/‎5‎/‎2017 at 8:34 AM, StevenL said:

Her daughter is handling her finances for her. She said the $26,000 was what she had for medical expenses. I will have double check, with her...

 

4 hours ago, Terry D said:

Don't mean to be insensitive but another case of folks making decisions and acting on them without consulting their tax advisor or accountant.

Don't mean to be insensitive either, but kids and other relatives don't consult us about money that belongs to someone else.  Looks like daughter made provisions for a $60,000 cushion for taxes. 

[Catherine]

6 hours ago, Terry D said:

another case of folks making decisions and acting on them without consulting their tax advisor or accountant

But I am *sure* they asked the barber's brother in law!  He said it was fine, and he knows WAY more than any of us do...  doesn't he?

[BulldogTom]

6 hours ago, Catherine said:

But I am *sure* they asked the barber's brother in law!  He said it was fine, and he knows WAY more than any of us do...  doesn't he?

We need to get Betty Sue and Jerome back on the board.  They are real smart and could give us the answer lickity split.

Tom
Newark, CA

[JohnH]

Maybe the daughter drove her mom to and from the doctor a lot during the year.  That's the ONLY thing I can possibly think of which would require $86,000 to cover $26,000 of medical expenses. 

[Gail in Virginia]

If the interest was $86,000 that means the total cashed in had to be at least $172,000, unless the bonds had not matured.  But still, there would have been some principal.

[RitaB]

18 minutes ago, Gail in Virginia said:

If the interest was $86,000 that means the total cashed in had to be at least $172,000, unless the bonds had not matured.  But still, there would have been some principal.

Yes, there had to be principal in there, for sure, but it's not uncommon for there to be much more interest than principal.  I just looked up a $5,000 series EE bond issued 10/1986.  It would have been purchased for $2,500 and the accumulated interest would be $9,032 when it matured 10/2016.  So, yeah daughter had more than $60,000 left after paying the medical expenses.  For sure.

 

[JohnH]

I still think the medical travel provided by the daughter is the most likely answer, and accounts for all the money. You can't have medical travel without a car. The math works like this:

Amount received.  $86,000

Less med exp:        (26,000)

Sub-total:                60,000

Less one car:         (60,000)

Net received:           - 0 -

[RitaB]

21 minutes ago, JohnH said:

I still think the medical travel provided by the daughter is the most likely answer, and accounts for all the money. You can't have medical travel without a car. The math works like this:

Amount received.  $86,000

Less med exp:        (26,000)

Sub-total:                60,000

Less one car:         (60,000)

Net received:           - 0 -

Crying.  And THAT'S how we do math around here!   Give me my roses while I'm here.  (And my inheritance.)  The principal went toward meals and incidentals.  (Clothes and vacations.)

(Steven, don't get offended at us, we're just playing.)