Medical expenses can be a significant financial burden for many people, especially those with chronic health conditions or who have recently had a major medical event. While there are many government and private programs that can help people pay for medical care, the tax code also offers some relief in the form of the medical expense deduction.
What is the medical expense deduction?
The medical expense deduction is an itemized deduction that allows taxpayers to deduct certain out-of-pocket medical expenses from their taxable income. In order to claim the medical expense deduction, taxpayers must itemize their deductions on Schedule A of Form 1040.
What medical expenses are tax deductible?
The IRS allows taxpayers to deduct a wide range of medical expenses, including:
- Medical care expenses: This includes the cost of doctor’s visits, hospital stays, surgery, prescription medications, and other medical treatments.
- Dental expenses: This includes the cost of dental exams, cleanings, fillings, and other dental procedures.
- Vision care expenses: This includes the cost of eye exams, glasses, and contact lenses.
- Long-term care expenses: This includes the cost of nursing home care, assisted living, and other long-term care services.
- Medical transportation expenses: This includes the cost of transportation to and from medical appointments, as well as the cost of transportation to and from a pharmacy to pick up prescription medications.
- Medical equipment and supplies: This includes the cost of wheelchairs, crutches, walkers, oxygen tanks, and other medical equipment and supplies.
- Impairment-related work expenses: This includes the cost of special equipment or accommodations that a disabled person needs to perform their job.
How much of my medical expenses can I deduct?
The amount of medical expenses that you can deduct depends on your adjusted gross income (AGI). In general, you can only deduct medical expenses that exceed 7.5% of your AGI. For example, if your AGI is $50,000, you can only deduct medical expenses that exceed $3,750.
How do I claim the medical expense deduction?
To claim the medical expense deduction, you must keep detailed records of all of your qualified medical expenses. This includes receipts, invoices, and canceled checks. You will also need to complete Form 1040, Schedule A, Itemized Deductions, and attach it to your tax return.
Here are some additional things to keep in mind about the medical expense deduction:
- You can only deduct unreimbursed medical expenses. This means that you cannot deduct medical expenses that were paid for by insurance or another third-party payer.
- You can deduct medical expenses that you paid for yourself, your spouse, and your dependents.
- You can deduct medical expenses that you paid in the current tax year, as well as medical expenses that you paid in the previous tax year and for which you did not claim a deduction.
- If you have medical expenses that exceed 7.5% of your AGI and you do not itemize your deductions, you may still be able to claim a deduction for certain medical expenses, such as long-term care expenses and impairment-related work expenses.
Examples of tax-deductible medical expenses
Here are some examples of tax-deductible medical expenses:
- Doctor’s visits
- Hospital stays
- Prescription medications
- Dental exams, cleanings, fillings, and other dental procedures
- Eye exams, glasses, and contact lenses
- Nursing home care
- Assisted living
- Long-term care services
- Impairment-related work expenses, such as the cost of special equipment or accommodations that a disabled person needs to perform their job
Examples of non-tax-deductible medical expenses
And for the usual suspects of questions, here are some examples of non-tax-deductible medical expenses:
- Over-the-counter medications
- Vitamins and supplements
- Cosmetic surgery
- Weight loss programs
- Health club memberships
- Spa treatments
- Massage therapy
- Chiropractic care
How to maximize your medical expense deduction
If you have a lot of medical expenses, there are a few things you can do to maximize your medical expense deduction:
Keep Your Records
- Keep detailed records of all of your qualified medical expenses.
Use a Credit or Debit Card
- Pay for your medical expenses with a credit card or debit card. This will make it easier to track your expenses and provide documentation to the IRS if you are audited.
Make a Lump-Sum Payment EOY
- Consider making a lump-sum payment at the end of the year for any outstanding medical expenses. This will allow you to claim the deduction in the current tax year, even if the expenses were incurred in the previous tax year.
Work with a CPA
- If you have a lot of medical expenses, you may want to consider working with a tax professional to prepare your tax return. A tax professional can help you ensure that you are claiming all of the deductions that you are eligible for.
Use a Flexible Spending Account (FSA)
- If you have a flexible spending account (FSA) or health savings account (HSA), be sure to use those funds to pay for your medical expenses. FSA and HSA contributions are made with pre-tax dollars, which means that you reduce your taxable income by the amount of your contributions.
Chronic Health Conditions
- If you have a chronic health condition then you may be able to deduct the cost of certain durable medical equipment (DME). This includes things such as a wheelchair or oxygen tank. DME is typically deductible if it is medically necessary and if it is not covered by insurance.
Medically Necessary Travel
- If you travel to receive medical care, you may be able to deduct the cost of your transportation and lodging expenses. Transportation and lodging expenses are typically deductible if the medical care is not available near your home and if the travel is primarily for the purpose of receiving medical care.
The medical expense deduction can be a valuable tax break for taxpayers with high medical expenses. By keeping detailed records of your expenses and following the tips above, you can maximize your medical expense deduction and reduce your taxable income.