Medical expenses can be a valuable source of tax savings, but they need to be properly tracked.
We recently had an older taxpayer who had just discovered that long-term healthcare insurance premiums were deductible. He adjusted his QuickBooks accounts and gave the data to us to prepare amended tax returns. When he received them back for review and signature, he was surprised to find that we had included the Long-term care and the Medicare Part B premiums, along with other medical deductions. This resulted in a huge number on allowable medical deductions on his Schedule A.
In going over the medical expenses worksheet, we found some items were not relevant because he had Medicare, Tri-Care and an excellent employer provided health care plan However, we found a whole host of of allowable deductions:
- Item 3 (Fees for Doctors, etc.). He was finding that his health care plans did not cover all of his bills and co-pays.
- Item 7 (Eyeglasses and contact lenses) His health plans had dropped coverage for eye glasses.
- Item 9 (Medical transportation expenses.) “My wife and I are always going to the doctor and we are always picking up prescriptions. My doctor and dentist are not local. I bet that we are incurring some substantial transportation costs.”
While not directly affected, he found the long-term care premiums for children and dependents noteworthy. When he had placed long-term care insurance on his spouse, the salesperson noted that polices for younger people were important because they are susceptible to debilitating illnesses and injuries. A stroke or a bicycle fall can lay a young person up for the rest of his life. The premiums for a young person are also very low.
He now realizes that it is important to keep careful track of all medical expenses and medical travel. Currently he has a large envelope full of claims and prescription notices. At the end of the year he will organize the data into a spread sheet and be able to claim a large deduction.He plans to use the increased refund to take a vacation. He claims that saving money on taxes "will be good for my health.”