Is someone in a long term care facility, who's pension is mostly paid to the facility, and Medicaid picks up the remainder of the cost, liable to still pay Federal taxes?

[Anonymous_ · Accepted solution]

See https://www.irs.gov/publications/p501#en_US_2022_publink1000270109

Be careful not to conflate having federal tax liability with being required to file a federal income tax return.

[rjs]

The pension is income to the person, even if most of it goes to the facility. It's the same as if the person received the pension income and then used it to pay the bill from the facility. If the person also receives Social Security benefits, and he or she is required to file a tax return, the Social Security also has to be reported on the tax return.

As tagteam said, having to file a tax return and having to pay tax are two different things. The person might be required to file a return, even if no tax has to be paid. You can use the calculator at the following link on the IRS web site to see if the person has to file a tax return.

Do I Need to File a Tax Return?

[NCperson]

@james92taxes - when you do the estimate, consider ITEMIZING the deductions.  Since the income is relatively low and the medical costs are relatively high, it could very well work out that itemizing makes more sense.  I would be very surprised if any tax is due.