Last year we cashed all of Mom's saving bonds and her 401K to pay for her Alzheimer's care in a facility. Taxes owed?

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JenniferK Asked February 2015

Last year we cashed all of Mom's saving bonds and her 401K to pay for her Alzheimer's care in a facility. Taxes owed?

All of her income has gone to her care. She has not been filing taxes for many years prior to this as she was below the income threshold. Cashing these two things in put her over the threshold but all of this money went to her care. Do I have to file income taxes return for her? She is out of money and on Medicaid and other assistance.

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Assuming the 401k was pretax money, it will be reported to the IRS as a withdrawal. So if this puts you over the income threshhold, yes you will have to file. Keep in mind there is an offset for memory care so you may not owe any taxes. Still you have to file or things will become a mess. Do it now, on time while all of the records are at hand. The Memory care facility should be able to give you a document about the total cost of Mom's care and what portion is deductible.

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Last year we cashed all of Mom's saving bonds and her 401K to pay for her Alzheimer's care in a facility. Taxes owed?

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