Has anyone encountered a nursing home resident on Medicaid owing federal income tax due to the loss on the personal exemption with the new tax law?

[kfoley06]

The resident has income from social security and 2 pensions.

[kfoley06]

There is no withholding on on the monthly checks.  A combination of the medical deduction and the personal exemption has always resulted is zero taxable income until this change.

[kfoley06]

Nothing has changed from last year.  The remaining taxable income after itemizing is just under $2000 resulting in a tax due of $196.  AGI is approximately $53,000.  The personal exemption was what zeroed out the remaining taxable income after deducting the applied income payments, which ecceed $4000 per month, to the nursing home that exceed 7.5% of the AGI.  This must have affected other people.  We are attempting to have the tax reimbursed from the state in the form of a reduced applied income payment.  There is always CT state income tax due, but CT has a form to address the Medicaid status and inability to pay.  The CPA has researched this and has not found any way to avoid paying the tax due on the federal side.  

[bosso3]

If you have rechecked the numbers, and a CPA has not found a way out, it seems to me you have done your homework.  Unfortunately, the result is not the one desired.  
( I'm a bit surprised that nursing home cost is "only" $4000 per month.  In my area (Wisconsin) it is $9 - 10K per month, although assisted living charges range from $3.5 - 5K per month.  It is possible that Medicaid is paying the difference.)

>> FYI:  For your planning purposes, 2019 medical expenses deductions will be limited to 10% of your AGI.  Plan accordingly.  <<

If you want to be proactive, you can contact your US congress person and Senators, giving them the same details you wrote here and explaining the results, and the impact of those results on this person.

If you find a better result, please update this thread.

[kfoley06]

Her monthly applied income payment to the nursing home is over $4000.  Yes, Medicaid is paying the difference.  I called my congressman’s office and was told they heard from another constituent with the same problem.  Later I heard from the nursing home that at least 3 other residents on Medicaid owe federal taxes.  I relayed this information to my congressman’s office as well.   We are aware of the change in the medical deduction and expect federal taxes to exceed $300 next year so am relieved that others are experiencing this as well.  It will have to be addressed.  Thanks for the input!

[bosso3]

The new tax law for 2018 eliminated personal exemptions, and increased the standard deduction. 

In 2017 the personal exemption was $4050 per person (more for over 65 or blind). 

In 2017 the standard deduction was $6350 (single) and $12,700 joint. 

2018 standard deduction is 12,000 single, 24,000 married (with adjustments for head of household and over 65 .. .)

If the person's marital status changed, or if they previously claimed many dependents, it is mathematically possible that 2018's  standard deduction does not offset the loss of personal exemptions. 

However, a Medicaid recipient, living in a nursing home would likely have lots of medical expenses, which would likely exceed the standard deductions.

My suggestion is to review all the entries you have made for income, and deductions.  Look for mistakes in entry or perhaps double entries.  Pay special attention to the medical expenses.  Also, look to see if the SSA payments are being treated as not taxable.  Check to see if the standard deduction is being taken or the itemized deductions are being used.  Also ensure that the correct filing status (single or married-joint) is being used and matches last year's returns, if appropriate.

If this does not resolve your question, please rsvp with details of your findings..