Sounds like you are pretty confused about a few things. We may be able to help if you clarify some things.
First---"....only 92.5% of what she pays can be deducted....." Medical expenses are an itemized deduction-----they have no effect at all on your tax due or refund unless you also have enough other itemized deductions to exceed your standard deduction. The amount of medical expenses that go on Schedule A is 7.5% of your AGI from line 12 of your Form 1040. But if that does not exceed your standard deduction, you need other itemized deductions such as mortgage interest, property tax, etc. What other itemized deductions do you intend to enter?
"Medicaid advised she had to stop having federal taxes taken out of his Social Security and pension..."
First you refer to this being about your mom, and then use the word "his." Whose Social Security benefits and whose pension are you referring to?
It is possible to stop having tax withheld from SS----contact SS in order to do that. Usually Medicaid recipients who are receiving Social Security benefits are required to assign their full SS benefit to the nursing home---and they get to keep just a small monthly amount for their own personal expenses. That may vary by state, but it is typically about $50/month. The rest of the SS goes to the nursing home. Have you talked with the business office of the nursing home to get clarity?
"....the spend down obligation..." Has Medicaid spend down been explained to you by an elder attorney or someone with solid knowledge of how that works? What other assets does your mom have? Does she still own a house, have a retirement or investment account, etc etc etc.?
"....she will owe taxes on the amount that can't be deducted which is about $5000.." Where are you getting that information from?
**Disclaimer: Every effort has been made to offer the most correct information possible. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.**
