Question: Mary’s mother, Martha, lives in a nursing home with an annual cost of $72,000. Fortunately, Martha has a long-term care (LTC) insurance policy that covered $65,000 of those expenses for the 2023 tax year. Mary believes that Martha can deduct all nursing home costs that exceed 7.5% of the adjusted gross income (AGI) of $90,000 reported on Martha’s I Schedule A. However, Martha’s CPA, Sue, disagrees and believes that Martha’s deductions will be limited to the amount not reimbursed through her LTC policy. Who is correct in this scenario and how much of a deduction is allowed by Martha?

Answer: Sue is right. When it comes to deducting medical expenses on your tax return, you can only include the amounts you personally paid out of pocket. Any amounts reimbursed by insurance must be subtracted from the total expenses before you calculate your deduction [§213(a)].

Since Martha’s long-term care policy covered $65,000 of the nursing home costs, she can only use the remaining $7,000 ($72,000 total cost minus $65,000 reimbursement) to determine the deduction.

Martha’s AGI is $90,000. Martha’s filing status is single. She will not be able to deduct the first $6,750 ($90,000 multiplied by 7.5%) in medical and dental expenses on Schedule A. Based solely on the nursing home annual cost, Martha would only be able to include $250 in expenses on Schedule A.

In summary, while Mary might have thought Martha could deduct all her nursing home expenses that exceed 7.5% of her AGI, the rules are clear. The deduction is limited to the expenses Martha actually paid after accounting for any insurance reimbursements. So, Sue’s guidance aligns with IRS regulations, ensuring Martha correctly navigates her tax deductions.

The Financial Crimes Enforcement Network (FinCEN) recently updated its list of FAQs to add or revise the answers to 25 questions addressing the filing of beneficial ownership information (BOI) reports. FinCEN’s extensive list of FAQs provides most of the agency’s guidance regarding the required filing of BOI reports.

Entities that meet reporting requirements created or registered with their secretary of state prior to 2024 must file their initial BOI report by Dec. 31, 2024. Those that were created or registered in 2024 have 90 days from the day they received notice they have been created or registered to file their initial BOI report. Beginning in 2025, newly created or registered entities will have 30 days from the date they were created or registered to file their report.

Notable items added to the FAQ include answers to questions addressing the following issues:

Freedom of Information Act

BOI reports to FinCEN are exempt from disclosure under the Freedom of Information Act (FOIA).

Non-attorney third-party submissions and the practice of law

Whether the submission of a BOI report by a third-party service provider that is not an attorney qualifies as the unauthorized practice of law is generally determined by state law. However, nothing in the Corporate Transparency Act (CTA) or FinCEN’s regulations prevent non-attorney third-party service providers from submitting reports on a company’s behalf if they have been authorized to do so.

Number of beneficial owners to report

A reporting company can have more than one beneficial owner who exercises substantial control, has ownership interests or both. There is no maximum number of beneficial owners who must be reported.

Nobody controls more than 25% of the company

FinCEN expects that every reporting company will be substantially controlled by one or more individuals and will be able to identify and report at least one beneficial owner.

Offices “similar” to the secretary of state

For BOI reporting purposes, most businesses are considered to have been created when the secretary of state or similar office has given notice that the creation or registration is effective. However, the term “similar office” is undefined in the statute.

According to FinCEN, a similar office is any office under the law of a state or tribe – including departments, agencies and bureaus – where or through which a domestic entity files a document to be created, or a foreign entity files a document to be registered to do business in the U.S.

Federal agencies are not similar offices.

Multiple beneficial owners

Multiple company applicants or beneficial owners can be added to a beneficial ownership report. The FAQ provides illustrated instructions on how to do that using FinCEN’s website.

Community property states

If both spouses own or control at least 25% of the ownership interest in a reporting company created or registered in a community property state, both spouses must be reported to FinCEN, unless an exception applies.

Corporate conversions

Depending on the law of a state or tribe and the type of entity undergoing conversion, filing for a conversion may result in the creation of a new domestic reporting company.

When the conversion results in a new domestic reporting company, it is required to file an initial BOI report. Additionally, some conversion filings that don’t create a new domestic reporting company may still require the submission of an updated BOI report.

For example, if a company that goes by the name “Company, Inc.” converts to an LLC and changes its name to “Company LLC,” it may be required to file an updated report because it is a change to required information that had previously been submitted.

Changes in jurisdiction

A reporting company must report the jurisdiction where it was originally created. But if it changes jurisdictions, the company must file an updated BOI report. For example, if a company ceases to be incorporated under California law and incorporates under Texas law, it must submit an updated BOI report.

Registering in other states

A reporting company that filed a BOI report based on its creation or registration in one state does not need to file additional BOI reports in connection with filings of secretaries of state or other offices in additional states when the registration only:

1. Authorizes the existing domestic company under the laws of one state or tribe to do business under the laws of another state or tribe
2. Authorizes a foreign reporting company already registered under the laws of one state or tribe to do business under the laws of another state or tribe

Updated or corrected FinCEN identifier information

Information that is used to request a FinCEN identifier (FinCEN ID) must be updated or corrected using a FinCEN identifier application. A FinCEN ID is a unique identification number issued by the agency that is not required but can simplify the reporting process.

Beneficial owners must report any change in the information submitted no later than 30 days after the change occurred. Individuals must correct any inaccuracies within 30 days of becoming aware of the inaccuracy or having reason to know about it. Reporting companies must update or correct their information by filing an updated or corrected BOI report, as necessary.

As reported by multiple media outlets in the early morning of Nov. 6, 2024, Donald Trump will likely be elected the 47th president of the United States. While there are many unknowns yet with what a second Trump term means for taxes, there are topics we know he’s discussed during his campaign.

1. 2017 Tax Cuts and Jobs Act extension

   a. The signature achievement of Trump’s first term, some expect regulations of the 2017 TCJA could be extended, which could have major tax implications for individuals and businesses. The decision to allow these provisions to expire is sure to be one of the top discussions in the early days of Trump’s second term. See the Reference Table: Expiring Provisions in the “Tax Cuts and Jobs Act” (TCJA, P.L. 115-97) for a list of provisions enacted by the TCJA as well as budget impacts.

2. SALT deductions

   a. Trump expressed a willingness to revisit the $10,000 limit on state and local tax deductions enacted as part of the TCJA.

3. R&D expenditures

   a. Trump and his Republican Congress will likely look to restore the Section 174 deduction for research and development expenditures.

4. Eliminating taxes on tips of restaurant and hospitality workers

5. Eliminating taxation of Social Security benefits

6. Eliminating taxes on overtime

7. Eliminating taxes on firefighters, police officers and members of the military

8. Tax credit for family caregivers taking care of parents or other loved ones

9. Interest write-off on car loans for those who buy a car made in the U.S.

To fund all of these tax cuts and credits, Trump proposed implementing high tariffs on goods entering the U.S.

NATP is closely monitoring the details of this news and will be in communication with our members if any of these tax items are extended or become law, and how the IRS implements these changes during tax season.

Become a member of NATP to receive important, timely information like this through our news alerts so you can keep working while we keep an eye on the changes that affect your business.