Medical bills can balloon when you have medical emergencies that your insurance does not fully cover. Fortunately, you may obtain some relief by deducting a portion of these expenses on your tax return under the Internal Revenue Code. In order to take advantage of this deduction, it is important that you understand what is considered to be a medical expense and how to correctly claim the deduction.
Value of the medical expense deduction
Under the IRS rules, taxpayers are able to deduct the qualified medical expenses exceeding 10 percent of their adjusted gross incomes for the tax year. Your AGI is your taxable income minus such adjustments as your student loan interest, IRA contributions and your deductions. Only the portion of your medical expenses that exceed 10 percent of your AGI may be deducted.
Which medical expenses are deductible?
Only qualified medical costs are deductible. These include vision care, dental care, surgeries, treatment and preventative care. You are also allowed to deduct the costs associated with psychiatric and psychological care. You are allowed to deduct the costs of prescription medications and prostheses such as hearing aids, contact lens, glasses and false teeth. Finally, if you keep good records, you can deduct the costs of traveling for medical care, including parking fees, bus fares and vehicle mileage.
What’s not deductible?
You may not deduct any of your medical expenses for which you receive reimbursements, including from your employer or your insurance company. The IRS generally does not allow you to deduct the expenses that you incur for cosmetic procedures, non-prescription drugs or general health care products such as toothpaste or over-the-counter diet products.
Claiming the medical expenses deduction
You must itemize your deductions on your tax return to claim the deduction for medical expenses. This means that you will not take the standard deduction. You should only choose to take the medical expense deduction if the total of your itemized deductions will exceed your standard deduction. Deductions are itemized on Schedule A of your IRS Form 1040.
You will report your total medical expenses that you paid during the tax year on line one of Schedule A. Next, you will enter your AGI on line two and 10 percent of it on line three. Finally, you will enter the difference between your medical expenses and 10 percent of your AGI on line four. This amount will then be used to reduce your taxable income.
Contact us today
To learn more about the medical expense deduction and other deductions that might be available to you, contact Tom DiTullio Accounting. We are experienced local tax preparers who can advise you about the different deductions that might be appropriate for you.