Medical expense tax deduction: Who can use it and how it works

The medical expense deduction is most beneficial to people with high medical expenses relative to their income.

You can deduct qualifying medical expenses above 7.5% of your adjusted gross income.
To claim medical expenses, you have to itemize your deductions instead of taking the standard deduction.
Medical expenses include PPE, prescription medications, doctor’s fees, and some insurance premiums.
This article was reviewed for accuracy and clarity by Luis Rosa, an expert on Personal Finance Insider’s tax review board
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If you were burdened by sizable medical bills or health expenses during 2021, there may be some financial relief available to you during tax season.

Some medical expenses are tax deductible at the federal level, under two general conditions:

Your qualifying medical expenses for the year exceed 7.5% of your adjusted gross income (AGI), which is your gross income less any above-the-line deductions, ANDYou itemize your deductions instead of taking the standard deduction.

If you file jointly with your spouse and/or claim dependents, typically everyone’s medical expenses can be combined. You may also include expenses paid for someone that does not live with you, like a parent, if they are considered a qualifying relative. Couples that are married but file separate returns must follow certain guidelines depending on whether they live in a non-community property state or a community property state, and both have to itemize or take the standard deduction.

Tax deductions reduce your taxable income and lower your overall tax liability. While items like student loan interest and IRA contributions can be deducted from your gross income without itemization, medical and dental expenses require that you itemize your deductions on Form 1040, Schedule A.

What is the medical expense deduction?

The medical expense deduction lowers the taxable income of people who spent more than 7.5% of their adjusted gross income (AGI) on prescriptions, disease treatment, doctor’s fees, and other medical costs during the tax year. 

The IRS expects taxpayers to be truthful when claiming the medical expense deduction, but you should always keep receipts as proof. Instructions for claiming the deduction are included on the tax forms you use to file your return.

Note: Many states also offer a medical expense deduction. Some states follow the federal guidelines while others allow a lower threshold that may be easier to qualify for.

What medical expenses are tax deductible?

The IRS says medical 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.”

Here’s a list of some common qualifying medical expenses for 2021, according to the IRS:

Medications that require a prescription, including drugs to alleviate nicotine withdrawal, as well as over-the-counter insulinFees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitionersInpatient hospital care or residential nursing home care, including the cost of meals and lodgingInpatient treatment at a center for alcohol or drug addiction or participation in a smoking-cessation programCost of infertility treatments, including freezing eggs or sperm and in vitro fertilizationBirth control pillsCost of a weight-loss program for a specific disease or diseases diagnosed by a physician, including obesityCost of laser eye surgeryCost of reading or prescription eyeglasses, contact lenses, false teeth, hearing aids, crutches, wheelchairs, and for a guide dog or other service animal to assist a person with physical disabilitiesTransportation primarily for and essential to medical care, such as fare for a taxi, bus, train, ambulance, gas used for transportation by personal car, or you can deduct 18 cents per mile for medical use of your carInsurance premiums paid by you (not your employer) for policies that cover medical care, or limited amounts paid for a qualified long-term care insurance policy and Medicare premiumsFees for treatment at a health institute authorized by a physician to alleviate a physical or mental disability or illnessCost of equipment installed in a home or improvements made to a home to accommodate a disability to the extent that they do not increase the value of the homePersonal protective equipment used to prevent the spread of COVID-19, including hand sanitizer, masks, and sanitizing wipes Legal abortionsAmbulance service

If you’re self-employed and earned a profit during the tax year, you may be able to deduct premiums paid for medical, dental, or long-term care insurance for yourself, spouse, and any dependents, up to the amount of your net profit. Unlike the standard medical expense deduction, you don’t need to itemize to take advantage — it’s an adjustment to your gross income.

What medical expenses aren’t tax deductible?

Non-qualifying medical expenses include cosmetic surgery, gym memberships or health club dues, diet food, and non-prescription drugs (except for insulin). 

Medical expenses are deductible only if they were paid out of your pocket in the current tax year. Payments made via a credit card can be included in the year the charge is made. You can’t deduct the cost of a monthly prescription, for example, that was paid for by a person you don’t file taxes with, except for a qualifying relative,  or that was later reimbursed by your health insurance provider. You also can’t claim a medical expense that was paid for using money from a flexible spending account or health savings account, since that money is contributed on a pre-tax basis.

How do I claim medical expenses on my taxes?

You have to itemize your deductions instead of taking the standard deduction — a set amount determined by your filing status — to claim medical expenses. Itemizing is usually more time intensive, but it’s worth doing if you can save money.

Quick tip: Other types of deductions that require itemization are mortgage interest, property tax, state and local sales tax, and charitable contributions.

For the 2021 tax year, the standard deduction is $12,550 for single filers, $18,800 for heads of household, and $25,100 for married taxpayers filing jointly. There’s only value in itemizing your deductions if they total more than these amounts. But remember: The only qualifying medical expenses that count are those that exceed 7.5% of your adjusted gross income. 

Let’s say you’re single, have an AGI of $60,000, and spent $12,000 on medical expenses in 2021. The first $4,500 in medical expenses (7.5% of your AGI) are not deductible, but the next $7,500 in expenses are deductible. You would need more than $5,050 in other deductions — such as mortgage interest or property taxes — to receive a tax benefit from itemizing.

Do the math for your situation using Schedule A on Form 1040 or let online tax software do the calculations for you.

The medical expense deduction is most beneficial to people with high medical expenses relative to their income. If you think you may qualify for the deduction, run the calculations on your own or with the help of a professional so you don’t leave tax savings on the table.

If you could have itemized your deductions in a prior year and didn’t, you can file an amended tax return by filing IRS Form 1040-X within three years from the date you filed your original return, or within two years from the date you paid any tax due, whichever is later.

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