Did you spend a lot of money on your medical care last year? If so, you may be eligible for the medical expense deduction. In total, you must spend more than 10% (7.5% if you are age 65 or older) of your Adjusted Gross Income (AGI) on medical expenses in order to possibly benefit from the tax break. For some people, that’s a lot of dough, but if you qualify, the tax deduction can be significant. So take a few minutes to consider your possible medical expense deduction before skipping ahead to the next potential write-off.
Whose Medical Expenses Can You Deduct?
Your medical expenses, those of your spouse, and expenses for anyone who was your dependent at the time the expenses were incurred are deductible.
What About Reimbursed Medical Expenses?
To be tax deductible, medical expenses must not be reimbursed. In other words, if your insurance company pays for your expense (or reimburses you for an expense that you initially laid out), such expenses are not deductible. It must be genuinely “out of pocket” in order for you to have a tax deductible medical expense. If you pay part and your insurer pays part, the portion you pay is deductible.
When Can I Deduct a Medical Expense I Charged?
Credit card charges made to pay medical expenses in one year but the credit card bill is not paid until the following year are deductible in the year they were charged.
What Type of Medical Expenses Qualify?
Deductible medical expenses include payments necessary in order to diagnose, prevent, or treat illness. Obvious deductible expenses include visits to the doctor, dental exams, and X-rays. Also deductible are birth control pills prescribed by a doctor. On the other hand, you can’t deduct cosmetic surgery, unless the cosmetic surgery results from some sort of abnormality, perhaps from an accident or disease. If the cosmetic surgery is performed solely to improve one’s appearance, it is not deductible. On the same theory, teeth whitening is out too – sorry.
Psychological and psychiatric expenses qualify, as do rehabilitation costs related to drug and alcohol addiction recovery. Expenses for special schools for disabled individuals are eligible for the medical expense write-off as well. Don’t forget to include the cost of insulin and prescription drugs – but note that over-the-counter (OTC) medicines are not deductible. Perhaps somewhat surprisingly, OTC equipment and supplies can be deductible, however.
Other deductible medical expenses include:
- Contact lenses and laser surgery
- Treatment for sexual dysfunction
- Nursing homes
- Lactation expenses
- Lead paint removal
- Smoking cessation programs
What About Insurance Premiums?
Dental and health insurance premiums may be tax deductible as long as they are paid out of your pocket. This includes the amount you pay for your Medicare A coverage if you voluntarily enrolled in Medicare A, as well as Medicare B premiums. Long-term care insurance premiums are deductible too, but are subject to certain maximums based on the age of individual insured. Premiums taken out of your paycheck pre-tax as part of an employer-sponsored insurance plan are not tax deductible.
You don’t need to know all of the medical expense deduction rules. TurboTax will walk you though all of the medical expense deductions you are eligible for.