Other Tax Questions
Questions and comments on other topics covered in Fairmark.com, such as UTMA accounts, and any tax questions that don't fit our other categories.
Federal Income tax/medicaid
Posted by: Bokobob, January 4, 2009 04:59PM
My first post on the fairmark forum.

Question.

Scenario:

Married couple.
Wife has been in private pay skilled nursing home for more than 30 days, will continue to be on private pay while application for Medicaid is being processed...She is expected to go on Medicaid about March 1, 2009 which will pay her nursing home expenses after that..She will be on Medicaid the rest of her life and in the nursing home.

Wife has $1950 in passbook savings in her name as allowed..She has no other assets or real property in her name, or jointly with another..Wife's social security of $7500 annually will be turned over to /medicaid/nursing home in exchange for medicaid starting about 2/1/09. .wife has no other income, except interest from a $1950 passbook savings in her name...she is allowed to get up to $30 a month in income..

Husband is at home and gets to keep home, car, and a specified amount of money (including IRAs) in his own name..(These are so-called non-countable assets by Medicaid.) Husband is allowed to keep his own income, such as from Social security, pension, his IRA distribtutions, interest income on accounts in his name, etc. If this couple file a JOINT federal tax return for the 2009 tax year, will the Medicaid benefits of the wife be affected? (husband's social security, pension and investment income of accounts in his own name will be in the general range of $50,000 for 2009. Wife's Social Security will all be turned over to the Nursing home/medicaid after about March 1, 2009..)'
Of course, after 2009, there will be no Social Security income given directly the the wife..

I feel I have conveyed the gist of the question in layman's terms...
any advice is greatly appreciated....If you could spell out a summary of your interpretation in a few sentences, rather than just point me to IRS Publ # such and such it will be very helpful/.

Many thanks.

Bob

file a joint return
Posted by: jainen, January 4, 2009 05:22PM
>>there will be no Social Security income given directly<<

If they file a joint return, 85% of her Social Security will be taxable, costing about $1500 more. That's less than the tax savings from the additional standard deduction and personal exemption. If they itemize deductions, do some math to see which way is best.

I don't think Medicaid is affected by filing status, refunds, or even refundable credits. Call her social worker if you need details on that point.


Re: Federal Income tax/medicaid
Posted by: Boutwell, January 4, 2009 11:06PM
The amount of the Social Security taxable on a joint return can't be determined without knowing how much of the husband's $50,000 income is from Social Security. I plugged in $20,000, and the result was that only 20% of the combined SS of both spouses is taxable. In that case a joint return results in less tax, and it does not affect eligibility for or amount of Medicaid benefits.

If the wife's SS benefits are being used to pay her medical expenses not paid by Medicaid, and the taxpayers itemize deductions, that would be another reason to file jointly.

Re: Federal Income tax/medicaid
Posted by: Art, January 4, 2009 11:15PM
But the tax table favors filing MFJ when the two spouses incomes are very much different.

Re: Federal Income tax/medicaid
Posted by: Bokobob, January 4, 2009 11:44PM
tHANK YOU FOR Responses....the main thing of interest if is the couple can file jointly without affecting the wife's medicaid benefites....how much of SS will/will not be taxable is of interest, but secondary to teh main question: will couple be able to file jointly without affecting wife's medicaid status.
Regards,
Bob

Re: Federal Income tax/medicaid
Posted by: Boutwell, January 5, 2009 01:01AM
No, Medicaid eligibility has nothing to do with whether she files a joint return. As you have already found, the spouse's assets are counted, but not the spouse's income or tax filing status. Of course, a refund on a joint return may be countable.



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