When it comes to tax time, any deduction you can get is a good deduction! A lot of people are unaware that some medical expenses can be deducted from your taxes. This write off is especially helpful if you, or someone in your family, is struggling with health issues. It's easy to feel overwhelmed by medical bills as they add up very quickly.
In usual IRS fashion they have very specific conditions of what can be deducted, so make sure you understand all of the requirements before filing your taxes. If the IRS sees something they don't agree with, they will audit your return. Here's a rundown of the important facts:
The IRS allows you to deduct qualified medical and dental expenses if they exceed 10% of your adjusted gross income (AGI) for the tax year. Your AGI is your taxable income minus any adjustments to income such as deductions, student loan interest, and contributions to a traditional IRA. You must itemize your deductions on Form 1040, Schedule A.
Right now if you or your spouse is 65 or older, the threshold is 7.5% of your AGI, but that is scheduled to increase to 10% in 2017.
Whose expenses can be deducted?
You can add together expenses for yourself, your spouse, and your dependents. This actually includes not only your children, but "qualifying relatives" such as siblings and parents. I hoped pets might be included (hey, they offer pet insurance now…) but alas, they are not. The exception here is for guide dogs for the blind or deaf.
What are "qualified" medical expenses?
Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body. This means that even regular check ups can be included, and both medical and dental visits are covered.
I was actually surprised with some of the expenses the IRS will allow. The most important thing to do if you are going to claim a medical expense is to ensure you get a note from your doctor to back up your claim. Some examples of what they consider to be allowable deductions:
- Fees for doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
- In-patient hospital care or residential nursing home care, if the availability of medical care is the principal reason for being in the nursing home
- Acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction
- For participation in a smoking-cessation program and for drugs to alleviate nicotine withdrawal that require a prescription. Over the counter patches and gums are not included.
- A weight-loss program for a specific disease or diseases diagnosed by a physician, including obesity
- Insulin and payments for drugs that require a prescription (and yes, I checked…this does not include medical marijuana even if legalized by state law).
- False teeth, reading or prescription eyeglasses or contact lenses, hearing aids, crutches, wheelchairs
- You can even write off special equipment installed in a home, or for improvements, if their main purpose is medical care. For instance, if you build ramps or widen doors to accommodate a wheelchair.
- Transportation that is essential to medical care that qualifies as medical expenses
The IRS has a list of things that they specifically say aren't covered. Some examples:
- Cosmetic surgery
- Medicines and drugs from other countries
- Non-prescription drugs
- Health coverage tax credit
If you're going to claim a medical expense deduction, ensure you have the documentation to back up your claim. If you're unsure if your expenses qualify or if you need help with tax preparation or a tax issue, contact us to schedule a free, confidential consultation.