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Keys to deducting medical expenses

Getting sick really hurts. Thankfully, the Internal Revenue Service wants to help out ... well, a little bit. If you've had an extremely costly health year, you can probably deduct a portion of those medical expenses from your income tax.

You must meet two standards for your medical expenses to be eligible: You must itemize your deductions, and your total medical expenses must exceed 7.5 percent of your adjusted gross income. Don't automatically assume that your expenses aren't sufficient. Find out which expenses are allowable, and be sure you have included all allowable deductions for all eligible persons.

What?

Here's a list of the most common allowable medical expenses:

Allowable medical expense

Explanation or example

Health care services

Physician or household nursing care

Prescriptions

Self-explanatory

Certain health insurance premiums

Medical, dental and certain long-term care

Medical aids

Eyeglasses, contact lenses, wheelchairs, hearing aids or crutches

Transportation costs

Including travel at 10 cents a mile

Nursing home expense

If mainly for medical reasons

Certain home improvement expenses

Must be medical and exceed increase in fair market value of property.

Most of the above items are self-explanatory. Home improvement expenses warrant some further discussion, especially since these tend to be expensive.

When?

In what year is an expense deductible? For any tax year, deduct medical expenses paid in that particular year. When the services were actually rendered is irrelevant. For checks, "date paid" is the date the check is mailed or delivered. For credit card charges, "date paid" is the date the charge is made, even if you pay the credit card bill in the following year.

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If the insurance company reimburses you, then you can't deduct it. This makes sense since, in the end, you didn't pay the bill. You must reduce your medical expenses by the amount of the reimbursements you received in that year.

Who?

Besides including medical costs incurred for yourself, you can deduct medical expenses for other specified individuals provided that the stated relationship to you existed either at the time the individual received the medical service or at the time you paid the expense. Individuals whose medical expenses you can deduct include:

Your spouse -- Even if you and your spouse file separate returns, you can claim expenses you paid for your spouse if you were married either at the time your spouse received the medical services or at the time you paid the expense. Of course, if you file a joint return for a tax year, any expenses paid by either of you at any time during the year would be deductible.

Dependents -- You can claim expenses paid for a dependent as long as the person was your dependent either at the time the medical services were provided or at the time you paid the expense.

A couple more qualifications:

  • The person must either live with you for the entire year as a member of your household or be related to you.
  • You must provide more than half of that person's total support for that year.
  • Note that these rules aren't as strict as the conditions necessary for claiming the regular dependency exemption. In cases where you can't take the dependency exemption for someone, you can still deduct medical expenses paid on that person's behalf if he or she qualifies as a dependent under the above guidelines.

    Child of divorced or separated parents -- What if one parent claims a child as a dependent under the rules for divorced or separated parents? Each parent can include any medical expenses paid for the child, even if the other parent claims the dependency exemption. But they can't both claim the same medical expenses -- that would be silly.

    What's not allowable?

    There are a few medical-related items that aren't deductible as medical expenses, so don't go assuming you can write the following stuff off:

    Medical related expenses that aren't deductible

    Explanation or example

    Cosmetic surgery performed only for appearance purposes

    Face-lifts, hair transplants, and liposuction

    Insurance premiums

    Life insurance, loss of earnings or guaranteed payments while in hospital

    Medical portion of automobile insurance

    Self-explanatory

    General programs to improve health

    Health club dues

    Over-the-counter medicine

    Self-explanatory

    When in doubt as to the deductibility of a particular expense, consult a tax preparer or accountant.

    -- Posted: March 15, 2000

     

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