IRA conversion effects on my medical expense deduction

[mj22]

I've been out on disability this year and have had a lot of medical expenses that I'm hoping to counter a bit using the medical expense deduction. However since I'm also making less while on disability, I was thinking of doing a IRA conversion. I know that I'll have to pay taxes when on the converted amount. But when it comes to determining my AGI, will the converted IRA amount count as income just like my disability payments, 1099-INT, and 1099-DIV income? I want to maximize my medical expense deductions but have been told I should take advantage of my lower tax rate this year and convert my IRA. Help! 🙂

[VolvoGirl]

Sorry yes the IRA conversion will increase your AGI and reduce the medical deduction.  You can only deduct the medical that's over 10% of your AGI.   

But will you have enough total deductions to itemize instead of taking the Standard Deduction?  The Standard Deduction is now pretty big.  

Starting in 2018 the Standard Deduction doubled so many people switched to the Standard Deduction.  And there is a max 10,000 limit (5,000 MFS) of property tax and state taxes "SALT".

For 2019 the standard deduction amounts are:

Single 12,200 + 1,650 for 65 and over or blind

HOH 18,350 + 1,650 for 65 and over or blind

Joint 24,400+ 1,300 for each 65 and over or blind

Married filing Separate 12,200 + 1,300 for 65 and over or blind

[mj22]

Yes, my medical expenses are over 10% my current AGI (without the conversion) and approx 7k above the $12,200 deduction for a single filler. But are you saying that I would have to itemize everything else in order to take the medical expense deduction? In other words, I wouldn't be able to take the standard deduction and add the medical deduction? (I realize that might be a silly question, but I thought I could take the standard deduction and my medical expenses would be in another section or were a separate type of deduction.)

[VolvoGirl]

No.  It's either the Standard Deduction OR Itemized Deductions.  But if your Medical (over the 10% of AGI)  is over the Standard Deduction you can use it plus any other deductions you have.  So just enter them all and Turbo Tax will give you the larger deduction.

Itemized deductions are things like Medical, Gifts to Charity, State Income Taxes Paid, Mortgage Interest, Property Taxes, Car Registration fees, etc.

[mj22]

Thank you so much! You've been a great help!

[dmertz]

Note that the tax code changes signed into law a week ago change the deduction for medical expenses back to those in excess of 7.5% of AGI instead of 10% of AGI (Schedule A line 2).  Expect a future update to 2019 TurboTax to incorporate that change and do not file until that is corrected in TurboTax.  This change means that the increase in your AGI resulting from a Roth conversion will have slightly less of an effect on the amount of medical expenses you are able to deduct than it would with the 10%-of-AGI threshold.