The instructions for VA Form 760 say that the Virginia deduction for long-term healthcare insurance premiums is completely disallowed if you claimed a federal income tax deduction of any amount for long-term health care insurance premiums paid during the taxable year.
The Turbo Tax step by step for VA asks the following question: Did you have premiums paid for long-term care insurance, that were not actually included as a deduction on your federal return?
My question is: What constitutes a deduction of medical expenses on the federal return? Does the term deduction in this context include only the medical expenses above 7½% of AGI that are used to reduce taxable income (1040 Schedule A line 4) or does it include all the medical expenses reported on line 1 of 1040 Schedule A.
The IRS indicates the following: “You may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income. You figure the amount you're allowed to deduct on Schedule A (Form 1040).” This might suggest that deduction means the amount in line 4 of 1040 Schedule A.
If this is the case, and if long-term-care premiums are less than 7½% of AGI, could it be maintained that premiums for long-term care are not actually used as a deduction, even if they are included in the total of medical expenses in line 1 of 1040 Schedule A of the 1040? One allocates the premiums for long-term care to the tranche of expenses included in 1040 Schedule A line 3 and not deducted. If this approach is permitted, then premiums for long-term care can presumably be deducted on VA Form 760 even when itemizing medical expenses on the federal form. (Medical expenses are not being itemized on VA 760, owing to the higher VA threshold for allowability.)
If the term deduction in the present context includes any expense in line 1 of 1040 Schedule A, then it is clear premiums for long-term care cannot be uses as a deduction on VA760 in the above scenario.
I would be grateful for any guidance on the above.
