Any amounts received under a life insurance contract on the life of a terminally ill individual are excluded from gross income. Amounts received under a life insurance contract by chronically ill individuals are also excluded from gross income if certain requirements are satisfied. Similar exclusions apply when the amounts are received as a result of a sale or assignment of the life insurance contract to a viatical settlement provider.
The Tax Court in Feigh, (2019) 152 TC No. 15 has ruled that Medicaid Waiver payments, even though excluded from income, are still earned income for purposes of claiming EITC and additional child tax credit. This is opposite to the IRS’s position in Notice 2014-7 and may open the door to some substantial refunds from open years
The IRS has released final regulations related to the SALT limitation imposed by TCJA and the attempts by various states, most notably NY, NJ and CT, to skirt the $10,000 ($5,000 MFS) limitation on the deductibility of state and local taxes. The technique these states attempted to use to get around the limitation was by offering their residents the ability to make a charitable contribution in return for a credit against their state or local taxes, thus converting a limited tax deduction into a fully deductible charitable contribution.
Expenses allocable to a portion of a dwelling unit rented out are deductible under the vacation home rules. The amount of the deductible rental expenses would be the expenses attributable to that portion of the unit. And the days to be taken into account under that limitation rule would be the days on which the portion of the unit is rented at fair rental during the tax year and the days on which the portion of the unit is used for any purpose during the tax year.