Taking an unexpected trip to the doctor can really bust your budget. Depending on your insurance, you can pay up to $7,500 just to fix a broken leg. That’s the bad news. The good news is your out-of-pocket medical expenses are tax deductible and may be claimed on your tax return.
What Is the Medical Expense Deduction?
Taxpayers are only allowed to deduct medical, dental, and pharmaceutical expenses that exceed 7.5% of their adjusted gross income (AGI). For example, if your AGI is $10,000 and your medical expenses are $1,500, you can only deduct the portion over $750. Qualifying medical expenses include unreimbursed expenses such as preventative care, treatment, surgeries, dental and vision care, and specific payments for prescription medications and medical travel. Seven and a half percent may seem like a lot, but once you factor in medical expenses for you, your spouse, and dependents, it can add up quickly. ezTaxReturn supports the medical expense deduction and makes it easy to claim.
How Does the Medical Expense Deduction Work?
The medical expense deduction is a valuable tax benefit that allows you to reduce your taxable income by deducting qualified medical expenses. To take advantage of this deduction, your medical and dental expenses must exceed 7.5% of your adjusted gross income (AGI). This means that only the portion of your expenses that surpasses this threshold can be deducted.
Qualified medical expenses include payments made to doctors, dentists, and other medical practitioners for diagnosis, treatment, and prevention of diseases. Additionally, insurance premiums for medical care or long-term care insurance are also considered deductible. By understanding and utilizing this deduction, you can potentially lower your taxable income and reduce your overall tax liability.
What Medical Expenses Are Tax Deductible?
Generally, you can claim tax deductible medical expenses for the diagnosis, treatment, and prevention of your illness. This includes:
- Abortion
- Acupuncture
- Alcoholism
- Ambulance
- Annual Physical Examination
- Artificial Limb
- Artificial Teeth
- Birth Control Pills
- Body Scan
- Braille Books and Magazines
- Breast Pumps and Supplies
- Breast Reconstruction Surgery
- Chiropractor
- Contact Lenses
- Crutches
- Dental Treatment
- Disabled Dependent Care Expenses
- Drug Addiction
- Eye Exam
- Eyeglasses
- Eye Surgery
- Fertility Enhancement
- Guide Dog or Other Service Animal
- Hearing Aids
- Home Care
- Home Improvements
- Hospital Services
- Insurance Premiums
- Employer-Sponsored Health Insurance Plan
- Long-term care services
- Health reimbursement arrangement (HRA)
- Medicare Part A
- Medicare Part B
- Medicare Part D
- Prescribed medication
- Therapy
For a full list of deductible medical expenses, check out IRS Publication 502. Please note, all bills must have been paid during the calendar year in order to count towards your limit. Additionally, certain dental expenses paid by employer-sponsored plans are not eligible for tax deductions unless explicitly included in the individual’s Form W-2.
Easily Overlooked Expenses
When it comes to deducting medical expenses, some costs are easily overlooked but can still qualify for the deduction. Here are a few examples:
- Travel Expenses: Costs related to traveling for medical care, such as mileage, bus fare, and parking fees, can be deducted.
- Lodging Expenses: If you need to stay away from home for medical treatment, lodging expenses may be deductible.
- Meals and Lodging at Hospitals: Expenses for meals and lodging at a hospital or similar institution can be included.
- Medical Conferences: Admission and transportation costs for medical conferences related to a chronic illness can be deducted.
- Home Improvements: Modifications to your home to accommodate a disability, like constructing ramps or widening doorways, are deductible.
- Alternative Treatments: Expenses for alternative treatments such as acupuncture and chiropractic care qualify.
- Reproductive Health: Costs related to birth control pills and fertility treatments are also deductible.
By keeping track of these often-overlooked expenses, you can maximize your medical expense deduction and potentially save more on your taxes.
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What Medical Expenses Are Not Tax Deductible?
A lot of medical expenses are tax deductible, but not all of them. Here are some that you cannot deduct:
- Cosmetic surgery
- Electrolysis or Hair Removal
- Funeral expenses
- Hair Transplant
- Maternity Clothes
- Nonprescription Drugs and Medicines
- Nutritional Supplements
- Teeth Whitening
Only unreimbursed medical expenses, such as those not covered by insurance or reimbursed by employers, are eligible for itemized deductions.
What Is the Medical Mileage Rate?
When it comes to qualified expenses, you’re not limited to the figure on your doctor’s bill. Any money spent on transportation to and from your appointment may also be deductible. This includes the cost of taking a cab, public transportation, or an ambulance. Medical bills, such as unreimbursed medical expenses that exceed a certain percentage of your adjusted gross income, can also be deducted.
If you prefer to chauffeur yourself, you may be able to claim a medical mileage deduction. For tax year 2024, the medical mileage rate is 21 cents a mile. Gas, tolls, and parking are also deductible medical expenses.
Qualifying for the Medical Expense Deduction
To qualify for the medical expense deduction, your expenses must meet specific criteria. Here’s what you need to know:
- Paid During the Tax Year: Only expenses paid within the tax year can be deducted.
- For Medical Care or Treatment: The expenses must be for medical care or treatment.
- Not Reimbursed: Expenses that have been reimbursed by insurance or other sources cannot be deducted.
- Exceed 7.5% of AGI: Your total medical expenses must exceed 7.5% of your adjusted gross income.
Additionally, you must itemize your deductions on Schedule A of your tax return to claim the medical expense deduction. By meeting these criteria, you can take advantage of this valuable tax benefit.
Deduction Limits and Thresholds
The medical expense deduction is subject to certain limits and thresholds. Specifically, you can only deduct the amount of your medical expenses that exceeds 7.5% of your adjusted gross income (AGI). For example, if your AGI is $50,000 and you have $10,000 in medical expenses, you can only deduct $2,500 ($10,000 – $7.5% of $50,000). Let ezTaxReturn calculate your medical expense deductions and complete all the paperwork for you—file with ease and get the refund you deserve!
How Do I Claim the Medical Expense Deduction?
To deduct your medical expenses, you must itemize and use Schedule A to calculate your deduction. This means you can’t take the standard deduction. So it’s best to only take the itemized deductions if they exceed your standard deduction. Ready to file? Use ezTaxReturn to easily claim your medical deductions and maximize your refund!
Special Considerations
When claiming the medical expense deduction, there are several special considerations to keep in mind:
- Self-Employed Individuals: If you’re self-employed, you may be eligible for a tax deduction on premiums paid for self employed health insurance. This can include coverage for yourself, your spouse, and your dependents. Be sure to check the eligibility criteria and use the appropriate forms to report these deductions.
- Health Savings Account (HSA): Expenses paid with HSA funds may be deductible.
- Medicare: If you’re eligible for Medicare, you can deduct expenses related to Medicare premiums and copays.
- Medicaid: Those eligible for Medicaid can deduct expenses related to Medicaid premiums and copays.
It’s also important to keep accurate records of your medical expenses, as the deduction is subject to audit by the Internal Revenue Service (IRS). By staying organized and informed, you can confidently claim the medical expense deduction and potentially reduce your taxable income.
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The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
