Happy Summer, Clients and Friends!

We hope you and your family are doing well as summer commences! Whether you’re looking forward to some exciting travel plans, more time to relax and unwind with family and friends, or both, we trust that the months ahead will bring new opportunities to live your life to its fullest potential.

This summer finds our team celebrating 30 years focused on developing customized  strategies and providing tailored advice to support what brings the most meaning and purpose to the lives of our clients and their families. We are deeply grateful for the many clients, strategic partners, and friends of our firm who have played an integral part in our success, and we are honored by the trust you continue to place in our team.  

As we continue to expand our team with the level of caring financial talent you expect, we’re excited to welcome David Rapasi to our 401(k) Prosperity^® corporate retirement and institutional investment planning division. For more than two decades, David has focused on delivering tailored retirement plan fiduciary and investment oversight solutions to business owners, retirement plan sponsors, and their plan participants. I encourage you to take a moment to learn more about David’s background below and feel free to call him at 440.740.0130 x229 or email David@ReturnOnLifeWealth.com with any questions that you, or a colleague or business associate, may have about your defined benefit or defined contribution plans.

We have much more news to share below, including our thoughts on the direction of the financial markets in our Market & Economic Update. We also encourage you to visit our Getting Frank Blog or  listen to our recent podcasts where we discuss topics including multigenerational wealth strategies, life insurance planning, diversifying your portfolio with real estate, and more at Frank Wealth Insights.

As always, we encourage you to reach out to your dedicated team whenever you have questions or when circumstances in your life change. If you need additional help or someone you know needs our advice, remember, we’re only a phone call away at 440.740.0130.

What’s In It for You?

At-a-glance guide to your 2nd Quarter 2024 Frank Talk newsletter:

• News & Events
  • Awards & Recognition
    
    • Frank Fantozzi is recognized by Crain's as a 2024 Notable Leader in Finance
  • Team Updates
    • David Rapasi joins Return on Life^® Wealth Partners and 401(k) Prosperity^®
  • Upcoming Events
    • Smart Business - Family Business Conference & Awards - September 5^th
    • The 16^th Annual Cleveland Economic Summit – September 26^th
      
• Resources
  • 2024 Federal Tax Rates Guide
  • 2023-2024 Tax Planning Guide
  • Complimentary Second Opinion Service
  • Visit Our Blog and Podcast and Join Us on Social Media
• Market & Economic Update

News & Events

Awards & Recognition

Frank Fantozzi is Recognized as a 2024 Notable Leader in Finance

Return on Life Wealth Partners^® President and Founder Frank Fantozzi, CPA, MST, PFS, CDFA, AIF^®, CEPA was named among Crain’s 2024 Notable Leaders in Finance. The list, which is compiled by Crain’s Cleveland Business, recognizes accomplished Northeast Ohio business leaders across the financial sector, including banking, venture capital, investment, private equity, and institutional money management firms. Financial professionals named to the Crain’s 2024 Notable Leaders in Finance list must meet certain criteria, including being based in Northeast Ohio, having at least five years in the profession, and being employed by a financial firm or institution. Honorees do not pay to be on the list.

Team Updates

David Rapasi Joins 401(k) Prosperity^®

We’re excited to announce that David Rapasi joined our team in May 2024. With over two decades of experience in financial services and retirement plan design and administration, David brings a wealth of knowledge to our growing team and will be a valuable asset to our corporate retirement and institutional investment planning division, 401(k) Prosperity^®.

Before joining our team, David spent five years at Fisher Investments 401(k) Solutions, consulting with business owners across multiple industries to assess and enhance their retirement plans. Prior to that, he worked at several well-known retirement plan and employee benefits providers, including Trinity Pension Consultants, Paychex, and ADP. He has been repeatedly recognized throughout his career for his accomplishments in business development, sales leadership, and revenue growth. Contact David at 440.740.0130 x229 or email David@ReturnOnLifeWealth.com.

Upcoming Events

2024 Smart Business Family Business Conference – September 5th

For the 8th consecutive year, Planned Financial Services will sponsor the Smart Business Family Business Conference & Achievement Awards with Frank Fantozzi participating as one of the industry expert panelists providing insight and addressing the challenges of family businesses. The conference will take place on Thursday, September 5^th  from 7:30 a.m. – 11:00 a.m. at Corporate College East in Cleveland, Ohio.

Save the Date! 16^th Annual Cleveland Economic Summit – September 26th

We look forward to welcoming you and your guests to our 16th Annual Cleveland Economic Summit on Thursday, September 26, 2024, at the Cleveland Botanical Garden/Woodland Hall from 4:00 – 6:30 pm. This year’s Summit will feature two dynamic speakers, Andrew Medvedev, Interim Co-Dean at Case Western Reserve University (CWRU) Weatherhead School of Management (previously a managing director and portfolio manager at Morgan Stanley, and Brian Zimmerman, Chief Executive Officer at Cleveland Metroparks. Hosted by Frank Fantozzi, the Summit will address topics impacting the local and national business environment and factors influencing your taxes, business and personal finances this election year. Save the date and watch for an invitation via email in the coming weeks with more details about the speakers and venue.

Recent Events

Smart Business - Cleveland Dealmakers Conference

Return on Life^® Wealth Partners participated as a specialty sponsor for The Smart Business Dealmakers Conference on June 13th at Hotel Cleveland, where Frank Fantozzi served on the Host Committee. The conference connects hundreds of Northeast Ohio business leaders, from middle-market CEOs to top investors and lenders, to leading M&A advisers. Sessions ranged from raising capital to buying and selling companies to planning for liquidity events across the M&A landscape.

Access Recorded Webinar: Market Noise Live: 2024 Election Year Update

Thank you to those who joined on Thursday, April 11th for our Market Noise Live Webinar, An Election Year Market Update. Host, Frank Fantozzi, and wealth advisors, Cynthia Yang, CFA^®, CAIA^®, CIPM and Chelsea Hussey, CLU^®, ChFC^®, CFP^®, shared insights on what they believe may be in store for the financial markets and economy in the months ahead. If you missed it and would like to learn about the potential impacts for your business or personal investment planning, or how your Return on Life^® Wealth Partners team is working to help manage portfolio risk and position client portfolios for long-term success, click on the links below to watch the live recording or access the presentation slides:

ACCESS THE LIVE WEBINAR RECORDING

DOWNLOAD THE PRESENTATION SLIDES

Watch for information on our next Market Noise Live! webinar event which will take place in October.

Smart Business: Smart Women Breakfast & Awards

For the 8th consecutive year, Return on Life^® Wealth Partners participated as a sponsor of the Smart Business Smart Women Breakfast & Awards, which took place on April 25, 2024, at the Westin Cleveland Downtown. Wealth Advisor Danielle LeChard, CFP^® participated as an award presenter. The Smart Women Breakfast addresses issues facing women in the workplace and recognizes the achievements of leading businesswomen, inspiring male advocates, and effective women’s programs through the Smart Women Awards program.

Resources

2024 Federal Tax Rates At-a-Glance Guide

Your guide to 2024 Federal Tax Rates is just a click away! This at-a-glance guide makes it easy to quickly find the information you need from federal income tax brackets and rates to capital gains and qualified dividend rates, contribution limits for retirement plans, annual gift and estate tax exclusion amounts, and more. View or download your complimentary 2024 Federal Tax Rates guide now!

Download Your 2023-24 Comprehensive Tax Planning Guide

The Return on Life^® Wealth Partners 2023-2024 Tax Planning Guide is your comprehensive guide to key tax provisions and deadlines that can help you reap the full benefits of collaboration with your qualified tax advisor throughout the year. The guide also includes helpful information on key changes under the SECURE 2.0 Act that went into effect in January 2024, that will be helpful for your ongoing tax planning. View or download your 2023-2024 Tax Planning Guide now.

Want to Refer a Friend or Family Member for a No-Obligation Second Opinion?

Our Second Opinion Service makes it easy! Designed for friends, family members, and colleagues of our clients and business associates, this no-obligation service provides the people you care about with an opportunity to benefit from the same expertise and guidance that you have come to expect as a valued client.

In many cases, a second opinion will simply provide confirmation, and the confidence that those you care about are on track to fulfill their values and achieve their goals with their current financial provider or strategy. However, if needed, we are happy to suggest ways in which we can help, including recommending another provider if we are not a good fit for their needs. Either way, following a Discovery Meeting and Investment Plan Meeting with our experienced team, they will receive a Total Client Profile and a Personalized Financial Assessment of their current situation.

Download a full description and learn more about the Return on Life^® Wealth Partners Second Opinion Service and the benefits it offers to the people you care about most.

Don’t Miss Out on the Topics That Are Important to You: Visit Our Getting Frank Blog and Frank Wealth Insights Podcast

Access timely information on financial, investment, and multigenerational planning, business growth strategies, and other topics by visiting our Getting Frank Blog and Frank Wealth Insights podcast. You can also access our latest blog posts and podcasts by connecting with us on social media at LinkedIn, Facebook, X (formerly Twitter) and YouTube.

Market & Economic Update

*Source: https://www.lpl.com/research/blog/how-low-can-volatility-go.html

How Low Can Volatility Go?

Key Takeaways

• Equity markets are enjoying a backdrop of extremely low volatility, supported by decelerating inflation, the prospect of less restrictive monetary policy, enthusiasm over artificial intelligence, and resilient corporate earnings and economic growth. 
• Periods of low implied volatility have historically produced above-average equity market returns. Since 1990, the S&P 500 has generated six- and 12-month respective returns of 8.8% and 13.6% after the CBOE Volatility Index (VIX) closed within its first quintile group (below 13.21).
• However, seasonal VIX trends and rising expectations for increased volatility of volatility suggest the days may be numbered for the current low-volatility backdrop.    

With the S&P 500 generating six record highs over the last seven trading sessions (as of June 20, 2024) — bringing the index’s record-high tally for the year to 31 — it shouldn’t come as a surprise that implied volatility is historically low. Receding expectations for market volatility have primarily been supported by easing inflation pressure, relatively less ambiguous monetary policy, impressive earnings, and a resilient U.S. economy.  

These factors, along with building excitement and spending on artificial intelligence, have helped drag the VIX down to multi-year lows this year. For reference, this index represents implied 30-day volatility derived from the aggregate values of a weighted basket of S&P 500 puts and calls over a range of strike prices. Generally, a rising VIX is associated with increased fear and uncertainty in the marketplace and falling stock prices, and vice versa for a declining VIX. The VIX is also used as a sentiment gauge and to hedge equity positions. 

The VIX has been trending lower since its highs registered during the bear market in 2022. The shift to a low-volatility backdrop has left the fear gauge near its lowest levels since January 2020 and well below its long-term average of 19.5.  

How low can it go? Near-term support for the VIX sets up at 11.86 and 11.52. Furthermore, the steepness of the VIX futures curve, as measured by the spot price less the six-month VIX futures contract has not reached extreme/contrarian levels, suggesting there could be more room for complacency. However, the CBOE VVIX Index, which measures the expected volatility of the VIX over the next 30 days started to tick higher in June, forming a positive divergence with the VIX that points to potential higher volatility ahead. 

Seasonality 

Seasonality trends suggest the current low-volatility backdrop could be challenged soon. he VIX has historically peaked in the first quarter before bottoming out at the beginning of July. The index then typically climbs higher for the remainder of the summer until peaking again in late September/early October. Election year peaks are also more pronounced, and the fall peak has historically been delayed until right around Election Day. The bottom line, VIX seasonality trends imply the lows of the year could be here soon and won’t last long.

Summary 

Implied equity market volatility remains supported by a constructive macro backdrop consisting of decelerating inflation, the prospect of less restrictive monetary policy, and resilient corporate earnings and economic growth. The broader market has historically generated above-average returns following periods of extremely low implied volatility. However, seasonal VIX trends and rising expectations for increased volatility of volatility suggest the current low-volatility window could soon be closed.

Closing Remarks

As the political landscape heats up this election year, you can rely on your Return on Life^® Wealth Partners team to keep you up to date on market and economic developments, and continue to monitor and adjust our portfolios, as appropriate. Please know that you’re always welcome to contact your dedicated team if you have questions or if you’d like to schedule a time to meet with us at our office. For those who prefer to meet virtually, we continue to use Zoom for virtual meetings, and are always available via phone. Just let us know how you prefer to meet, and we’ll make it happen!

We’re also honored to help our clients’ friends and business associates take greater control of their future with guidance from your team. We welcome and are grateful for the many introductions our clients continue to provide. If you, or someone you know, has questions or concerns about your personal investment strategy or business finances, please don’t hesitate to share information about our no-obligation Second Opinion Service and reach out to us at 440.740.0130.

Real People. Real Answers.

Health, Happiness, and a Life Well Lived,

Frank Fantozzi, CPA, MST, PFS, CDFA, AIF^®, CEPA
President & Founder
Frank@ReturnOnLifeWealth.com
ReturnOnLifeWealth.com


IMPORTANT DISCLOSURES

*A portion of this research material was provided by LPL Financial, LLC, June 2024. All information is believed to be from reliable sources; however, neither Return on Life Wealth Partners or LPL Financial make any representation as to its completeness or accuracy.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

For a list of descriptions of the indexes and economic terms referenced in this publication, please visit lplresearch.com/definitions.

All index and market data from FactSet and MarketWatch.

Unless otherwise stated, Return on Life Wealth Partners/Planned Financial Services and the third-party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific issues with a qualified tax advisor.

Investment advice offered through Planned Financial Services, LLC, a Registered Investment Advisor and separate entity from LPL Financial.

Copyright © 2024 Planned Financial Services. All Rights Reserved.

Convertible bonds are a hybrid form of debt security that can minimize downside risk and capture much of the equity market’s upside potential. For most individual investors, the best way to gain exposure to these securities is through convertible bond funds, such as specialty mutual funds or exchange-traded funds.

Before you add these investments to your diversified investment portfolio, it’s important to understand the different types available and how they work. Here’s a brief overview.

From fixed income to equities

As the name suggests, a convertible bond is a bond that can be converted into shares of the issuer’s common stock in the future. It provides the benefits of fixed income (albeit at lower yields than regular corporate bonds) and allows the holder to potentially benefit from growth if the issuer’s stock price increases.

A convertible bond’s “conversion price” is the price at which an investor can convert the bond into equity shares. Typically, the conversion price is higher than the stock price at the time the bond is issued. A bond’s “conversion ratio” is its face value divided by the conversion price and represents the number of shares an investor would receive upon conversion.

Here’s an example: Chris invests in a convertible bond with a face value of $100,000 and a conversion price of $200. The conversion ratio is $100,000 / 200, or 500, meaning Chris can exchange the bond for 500 shares of the company’s stock. Suppose the company’s stock price is $150 when the bond is issued. If the price increases to $250 ($50 over the conversion price), Chris will enjoy a $25,000 gain (500 x $50). On the other hand, if the price rises to only $180 ($20 less than the conversion price), the conversion will produce a $10,000 loss (500 x $20). So Chris would be better off not converting and receiving the bond’s face value at maturity.

3 flavors

Convertible bonds come in three flavors:

1. Standard (also called “vanilla”), where the investor has the option to hold the bond to maturity or convert it to common stock,
2. Mandatory, where the bond automatically converts to common stock at a specified date, and
3. Reverse, where the issuer has the option to buy back the bond at face value or convert it to stock shares.

Standard convertible bonds are the most common form. Their yields are generally lower but offer the greatest upside potential. Mandatory and reverse convertible bonds offer higher yields but pose a greater risk of loss — particularly reverse convertibles because the issuer holds the option and will usually do what’s best for the company rather than for the bondholder.

Advantages and risks

The biggest advantage of owning convertible bonds is control. With a standard convertible bond, the investor chooses to either hold the bond until maturity or convert it, depending on whether the stock price exceeds the conversion price. (This option isn’t available with mandatory or reverse convertibles, generally making them less desirable to investors.) Even though these securities have lower yields than regular corporate bonds, they provide a guaranteed income stream and higher upside potential than corporate bonds.

Convertible bonds also offer some protection in the event the issuer runs into financial trouble. Should the issuer liquidate, convertible bond holders typically enjoy priority over common stockholders. However, these bonds are subordinate to other types of debt. In addition to their lower yields and lower liquidation priority, convertible bonds tend to be issued by companies with lower credit ratings. This can make them risky, and it’s possible for investors to lose their original investment amount.

Maximizing upside

Historically, convertible bond funds have captured much of the equity market’s upside while minimizing losses during market downturns. But there’s no guarantee they’ll always perform this way. Whether they belong in your portfolio depends on several factors, including what you already own, your investment goals and your risk tolerance.
© 2024

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

A revocable trust can be a powerful estate planning tool, but it only works fully if you fund it by transferring assets to the trust. Forgetting to fund a revocable trust is a common, but costly, mistake. It’s a bit like opening a high-interest savings account but neglecting to deposit money in it. Following are some general guidelines on which assets belong in your revocable trust.

Several advantages over a will

A revocable trust (sometimes referred to as a “living trust”) offers several advantages over a will alone. A properly funded revocable trust allows you to specify how the trust’s assets will be managed and distributed after your death, without the time and expense of probate. Avoiding probate by using a revocable trust also helps keep your financial affairs private.

Another benefit: Unlike a will, a trust can be used to provide for the management of your financial affairs in the event you become incapacitated. And, as its name suggests, this type of trust is revocable, giving you the flexibility to amend, terminate or add assets to it at any time.

Assets to include

Assets typically used to fund a revocable trust include:

Real estate. It’s common for people to hold their primary residences, vacation homes and other real estate in revocable trusts. Making the transfer is simply a matter of executing and recording a deed transferring title to the trust. For property subject to a mortgage, you should ask the lender whether it requires any additional steps or documents to complete the transfer.

Bank accounts. Bank accounts of significant value — including checking and savings accounts, certificates of deposit (CDs), money market accounts and even safe deposit boxes — generally should be transferred to your revocable trust. Follow your bank’s procedures for making the transfer, which may involve furnishing a certificate of trust. One caveat: Before attempting to transfer CDs to a trust, find out whether doing so will trigger early withdrawal penalties. If so, consider postponing the transfer until the CDs mature.

Investments. You should transfer brokerage and other investment accounts to your revocable trust. Your financial advisors or the account custodians can help you complete the necessary paperwork. For individual investments such as stocks or bonds, you may need to request that the certificates are reissued in the name of your trust.

Business interests. If you own an interest in a privately held business (such as a closely held corporation, partnership or limited liability company) you may be able to transfer it to your revocable trust while maintaining your voting rights and other management powers. Be sure to consult the company’s bylaws or operating agreement for any restrictions on transferring your interest.

Personal property. This category includes jewelry, electronics, furniture, artwork, antiques, clothing and collectibles. Typically, these items have no title or registration, but you can transfer ownership to your revocable trust by executing an assignment of personal property.

Be aware that revocable trusts usually provide little or no protection against creditors’ claims during your life. If asset protection is a concern, you may want to consider other forms of ownership, such as a domestic or offshore asset protection trust.

Assets to exclude

Certain assets pass via beneficiary designation rather than through probate, so there’s no need to transfer these nonprobate assets to your revocable trust. And for certain assets, transferring them to a trust may be prohibited or have negative consequences. If you wish to have nonprobate assets managed by your trust, one option is to name the trust as a primary or contingent beneficiary. To avoid unintended consequences, it’s critical to coordinate your beneficiary designations with your overall estate plan.

Nonprobate assets include retirement accounts, such as IRAs and 401(k) plans. Transferring these accounts to a trust may be deemed a distribution, possibly triggering income taxes and early withdrawal penalties. You can name your trust as a beneficiary but be sure to discuss the potential tax implications with your advisors first.

Health Savings Accounts and medical savings accounts generally can’t be owned by a trust, although you may be able to name your trust as a beneficiary. And because they pass by beneficiary designation, life insurance policies don’t belong in your trust, either. That said, if you’re concerned about asset protection or minimizing gift and estate taxes, it may make sense to set up an irrevocable life insurance trust to hold a life insurance policy.

Keep transferring acquisitions

Funding a revocable trust isn’t a one-time event. As you acquire new assets, it’s important to transfer them if it’s appropriate. It’s also a good idea to have a “pour-over will” as a fail-safe. A pour-over automatically transfers any assets still titled in your name at death to your trust. Those assets won’t avoid probate, but the will helps ensure that they’ll be distributed according to your wishes.

Sidebar:   What about vehicles?

It’s possible to transfer a vehicle’s title to a revocable trust, but it’s generally not advisable. Tax and registration requirements can make transferring title burdensome and expensive, and if the vehicle was financed by a loan, the lender may not allow you to transfer it. Also, ownership by a trust may expose other trust assets to liability should the vehicle be involved in an accident. Of course, keeping a vehicle out of your revocable trust may subject it to probate, but many states provide streamlined procedures for transferring vehicles to your heirs outside of probate. © 2024

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

This information is not intended to be a substitute for specific financial, legal or tax advice. We suggest that you discuss your specific situation with your qualified advisors.

The news lately has been filled with natural disasters, wars and other humanitarian crises around the globe. At the same time, you’ve likely received dozens of requests for donations to help with relief efforts. Many of these requests are from legitimate charitable organizations. But some may come from scammers attempting to take advantage of your generosity.

In recent guidance, the IRS explicitly advises taxpayers to be wary of criminals soliciting donations. As the IRS explains, if you fall victim to one of these scams, not only will your money end up in the pockets of criminals rather than with those who need it, but you’ll lose the ability to claim a charitable tax deduction. Plus, any personal information you share with a fake charity may be used to steal your identity.

You can help reduce the risk by following four tips:

1. Verify the charity before donating. Scammers often promote fake charities with emails or fraudulent websites or by “spoofing” a real charity’s caller ID. They may also use names that are similar, but slightly different, to well-known charities. Ask any promoter for the charity’s exact name, website and mailing address and confirm the information independently. One resource is the Tax-Exempt Organization Search tool at irs.gov.
   
   
2. Don’t give in to pressure. Legitimate charities should be happy to receive donations at any time. If someone pressures you to make an immediate payment or repeatedly contacts you to create a sense of urgency, that’s usually a red flag.
   
   
3. Choose a safe payment method. The safest way to make donations is by physically delivering a check to the charity (or mailing it from the post office, to avoid potential mailbox theft) or by using a credit card online. If you choose the latter method, make sure the charity’s payment processing app encrypts your data (look for SSL or TLS protocols). If a charity asks you to donate using gift cards or by wiring money, it’s likely a scam.
   
   
4. Don’t provide more information than necessary. The IRS advises taxpayers to “treat personal information like cash and not hand it out to just anyone.”

With just a few extra minutes, you can ensure that your donations go to qualified, legitimate charities. Another option is to donate to a well-established nonprofit that responds to a wide range of emergencies, such as the Red Cross or Doctors Without Borders. © 2024

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

This information is not intended to be a substitute for specific financial, legal or tax advice. We suggest that you discuss your specific situation with your qualified advisors.

As you likely know, health insurance doesn’t cover everything. In fact, multiple studies have found that out-of-pocket medical expenses are rising rapidly — even for the insured. If there’s good news, it’s that some unreimbursed health care costs can be tax-deductible in certain circumstances. Let’s take a look.

7.5% rule

If you itemize deductions on your income tax return, you’re permitted to deduct a variety of medical and dental expenses for yourself, your spouse and your dependents. But there’s a catch: You can take the deduction only if these expenses exceed 7.5% of your adjusted gross income (AGI) — and then you can deduct only the amount over the 7.5% threshold. For example, if your AGI is $200,000, the floor above which the deduction begins is $15,000 ($200,000 x 7.5%). So, if you have $20,000 in eligible health care expenses, you may claim a $5,000 deduction ($20,000 – $15,000).

Remember that this deduction is limited to unreimbursed expenses. You must reduce your total deductible expenses by any reimbursements from insurance or other sources, regardless of whether you receive the reimbursement directly or it’s paid on your behalf to a medical provider.

What qualifies?

Another potential stumbling block is the fact that not all medical and dental expenses qualify for the deduction. For example, expenses for cosmetic surgery, health-club dues, medical marijuana, vitamins and over-the-counter drugs (except insulin) generally aren’t eligible. Fortunately, in addition to most office visits, hospital stays and prescription drugs, these costs typically are deductible:

• Health insurance and qualified long-term care insurance premiums (subject to limits),
• Inpatient alcohol and drug addiction treatment,
• Acupuncture sessions,
• Weight-loss programs for physician-diagnosed diseases,
• Smoking-cessation programs,
• In vitro fertilization (IVF) programs,
• LASIK vision correction surgery,
• Adaptive equipment, such as eyeglasses, contact lenses, hearing aids, dentures, crutches and wheelchairs,
• Nursing home care, including meals and lodging, if the availability of medical care is the principal reason for residence, and
• Transportation expenses essential to obtaining eligible medical care, such as the cost of taxis, buses, trains or ambulances, as well as personal vehicle mileage.

Note that although transportation expenses related to obtaining care can be deductible, lodging and meal costs typically aren’t.

Tax tips for the self-employed

The self-employed can deduct 100% of the health insurance premiums they pay for themselves and their spouses, dependents and nondependent children under age 27, regardless of whether they itemize. (The deductible amount may be limited depending on the taxable income of the business.) You can even deduct premiums you pay for Medicare Part B, Medicare Part D or a medigap policy, if you continue to run your business after you qualify for Medicare. But be careful: You can’t claim the self-employed health insurance deduction if you’re eligible to participate in a subsidized health plan offered by an employer of yours or a family member.

If you’re self-employed and eligible for the 20% qualified business income (QBI) deduction, also weigh potential benefits of the self-employed health insurance deduction against any resulting reduction in the QBI deduction. Depending on your circumstances, it may be more advantageous to claim insurance premiums as an itemized deduction so you can preserve a larger QBI deduction.

Planning opportunity

The IRS provides a list of all qualified medical expenses on its website. If it looks like you might reach the 7.5% of AGI threshold in 2024, review the list and think about scheduling appointments or deductible services or making purchases that qualify before the end of the year. © 2024

Investment advice offered through Planned Financial Services, a Registered Investment Advisor.

This information is not intended to be a substitute for specific financial, legal or tax advice. We suggest that you discuss your specific situation with your qualified advisors.