Medical Expense Deductions: When Your Healthcare Costs Become a Tax Break
I often get asked whether medical expenses are tax-deductible. My answer is always “sometimes”. Life is constantly changing, and so can your tax situation. I never thought I would have enough medical expenses to claim on my tax return. Then one year, I found myself with a mountain of medical expenses; as a result, I was able to lower my taxable income. You never know when your medical expenses might qualify, take the time to review them. You might be leaving money on the table.
What Is Schedule A?
Medical expense deduction is only for those that itemize their deductions on the tax return and attach Schedule A.
Schedule A is the tax form used to list itemized deductions things like medical expenses, mortgage interest, state taxes, and donations. You only use it if your itemized deductions add up to more than the standard deduction. If they don't, you'll skip Schedule A and just take the standard amount. It's a good idea to gather your documents and run the numbers every year, you never know.
**If you file online through FileYourTaxes.com, the system will automatically calculate the higher deduction amount and include Schedule A when applicable. It's seamless and ensures you won't miss out on the larger deduction!
What Is Schedule A?
- Total qualified medical expenses must exceed 7.5% of your adjusted gross income (AGI).
- Medical expenses deduction is entered on Schedule A, Itemized Deductions
- Keep Detailed Records: Save all receipts, explanations of benefits (EOBs), and mileage logs. If the IRS audits your return, you'll need to prove your expenses.
- Timing Matters: You can only deduct expenses paid in the tax year you're filing for, not when the services were provided.
- Insurance Reimbursements Reduce Deductible Amounts: If your insurer reimburses part of a bill, you can only deduct what you actually paid out of pocket.
Qualified vs Not Qualified Medical Expenses
The IRS defines qualified medical expenses as the costs of diagnosing, curing, mitigating, treating, or preventing disease, and for treatments affecting any part or function of the body.
Here's a breakdown of what can and cannot be deducted:
Allowed Medical Expenses
- Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, and psychologists
- Prescription medications and insulin
- Medical aids like eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and prosthetic limbs
- Health insurance premiums (if paid with after-tax dollars), including premiums for Medicare Part B, Part D, and supplemental policies
- Long-term care services and insurance (with limitations based on age)
- Hospital services, nursing services, and inpatient care
- Transportation costs related to medical care, such as mileage, parking fees, tolls, and even airfare if travel is necessary for treatment
- Smoking cessation programs and weight-loss programs if prescribed to treat a specific disease (e.g., obesity, hypertension)
Not Allowed as Deductions
- Cosmetic surgery not medically necessary
- Over-the-counter medications (unless prescribed)
- Health club dues, even if recommended by a doctor
- Vitamins and supplements, unless prescribed for a specific condition
- Non-prescription nicotine patches or gum
- Medical expenses that were reimbursed by insurance or paid through a tax-advantaged account like an HSA or FSA
Ways to File Your Return
If you file online through FileYourTaxes.com, the system will automatically determine the higher deduction amount and include Schedule A when applicable. It's seamless and ensures you won't miss out on the larger deduction!
If you're filing a paper return, make sure you:
- Prepare Form 1040
- Complete and attach Schedule A, Itemized Deductions
- Include any supporting forms, like your W-2, 1098-C, etc
- Double-check that your income meets all requirements
