Is It Okay To Claim Medical Expenses On Your Taxes?
When you pay a lot for health care, it is normal for you to want to look into ways that you can deduct some of your expenses from the taxable income that is listed in Schedule A on Form 1040.
It is important that you itemize deductions in order to claim these expenses. There is another trick, being that medical expenses will only be deductible to where they exceed 10% of the adjusted gross income (AGI). When you have an AGI that is $75,000, the first $7,500 of your qualified expenses will not really count when it comes to deduction purposes.
There is also a temporary exemption to this 10% rate. From January 1st, 2013 through December 31st, 2017, for individuals that are age 65 and older and their spouses, if you or the spouse is 65 or order or you turned 65 during the tax year, you can deduct any unreimbursed medical expenses that are greater than 7.5% of your AGI. The threshold here remains at 7.5% of your AGI for taxpayers until December 31st, 2017.
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To get help while preparing your tax return, you can print out this page and then put a check next to each of the medical expenses that you had throughout the year.
Itemized Deductions For Medical Expenses
Medical expenses can be tax deductible by using itemized deductions. The total medial expenses that are in excess of 7.5% of your AGI could be deducted for itemized deductions. Starting off with 2013, the 7.5% threshold increases to 10% of the adjusted gross income.
FSA (Flexible Spending Account)
There are some employees that could be eligible for setting up a medical flexible spending account, otherwise referred to as FSA. This is an employee benefit that may be available through their employer. The FSA permits employees to save their pre-tax money by way of payroll deductions, then submitting various medical expenses to get reimbursed.
HRA (Health Reimbursement Accounts)
Several employers will offer employee benefits where the employer reimburses employees for medical expenses. Any reimbursements from HRAs will be tax free.
HSA (Health Savings Account)
People can set up an HSA either on their own or through a group plan through their employer. The HSA, much like the FSA, is a pre tax savings account. Unlike an FSA, health savings plans will not have a feature for use it or lose it for the accumulated savings. Health savings account holders may be able to use their savings to help pay for medical expenses on a completely tax free basis.
The IRS will allow you to deduct any qualified medical expenses that will not exceed 10% of the AGI that you have for the year. Your AGI is your taxable income minus adjustments to your income, including contributions to your traditional IRA, deductions and student loan interest.
If you have a modified AGI that is $45,000 and then $5,475 in medical expenses, you have to multiply the $45,000 by 10% to show that only expenses that exceed $4,500 are able to be deducted. This will leave you with $975 in medical expense deduction.
There is a temporary exemption that goes from January 1st, 2013 to December 31st, 2017 for people who are 65 or older, along with their spouses. If you or your spouse happen to be 65 or older or you turned 65 through the tax year, you are able to deduct any unreimbursed medical expenses that exceed 7.5% of the AGI. This threshold here stays at 7.5% of adjusted gross income for any taxpayers until December 31st, 2017.
What Medical Expenses Can Be Deducted?
The IRS will allow you to deduct treatment, preventative care, dental and vision care, and surgeries as qualifying medical expenses. You may also be able to deduct visits to psychiatrists and psychologists. Appliances like contacts, glasses, false teeth, hearing aids and medications are also going to be deductible.
You are also able to deduct expenses that you have to pay to travel to receive medical care, including your mileage on your vehicle, parking fees and bus fares.
What Is Not Deductible?
You are not able to deduct any expenses that end up reimbursed through your employer or your insurance company. Additionally, the IRS will disallow expenses for any cosmetic procedures. You are not able to deduct the costs of any non-prescription drugs, excluding insulin, or purchases for general health care like toothpaste, vitamins, health club dues, diet foods, nicotine products that are non-prescription in nature, or any medical expenses that are paid within a different year.
Medical Expenses Deduction Claims
In order to claim medical expenses and get the deduction, you have to itemize all of your deductions. To itemize, you need to take a standard deduction, so you should only be claiming the medical expenses deduction when you have itemized deductions that are more than a standard deduction.
- If you decide that you want to itemize, you have to use the IRS Form 1040 for filing your taxes and attach a Schedule A.
- On your Schedule A, you report the medical expenses that you paid throughout the year on line 1, then the adjusted gross income (state on line 38 of Form 1040) on line 2.
- 10% of your adjusted gross income gets entered on line 3.
- The difference between the expenses and 10% of your AGI get entered on line 4.
- The total on line 4 will get subtracted from the AGI to cut down the taxable income for the year.
- If this amount with your other standard deductions that are claimed are less than the standard deduction, it is not a good idea to itemize.