Medical expense deduction: How to claim medical expenses on your taxes
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Are medical expenses tax-deductible?
Your medical expenses may be tax-deductible under certain circumstances. If the medical bills you pay out of pocket in a year exceed 7.5 percent of your adjusted gross income (AGI), you may deduct only the amount of your medical expenses that exceed 7.5 percent of your AGI from your taxes.
You also must itemize your deductions to deduct your medical expenses. Most taxpayers no longer itemize because the 2017 Tax Cuts and Jobs Act greatly increased the standard deduction. Other criteria for eligibility include meeting the income threshold and the IRS standard of deductibility.
What is the medical expense deduction?
If you itemize your deductions each year using Schedule A, you might be able to deduct some of the medical (including dental) expenses you paid out of pocket that year. Deducting these expenses from your total earnings reduces some of your tax burden.
The IRS allows filers to deduct medical expenses that are more than 7.5 percent of their adjusted gross income. Let’s say your AGI for 2020 was $45,000. Multiply that by 0.075 and you get $3,375, which is the threshold for your medical expenses. If your unreimbursed, out-of-pocket medical bills totaled $6,000, that means that you can deduct $2,625.
Qualifying medical and dental bills for you, your spouse and your dependents — everyone listed on your tax return — count toward the deduction limit. Medical bills you paid for a deceased dependent, whether before or after the person died, also are deductible.
“Medical care 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,” according to the IRS.
What medical expenses are tax-deductible?
Here’s a list of the medical expenses that are tax-deductible.
- Travel expenses to and from medical treatments. For 2020 taxes, the medical travel rate is 17 cents per mile, down from 20 cents per mile in 2019.
- Insurance costs, including premiums, co-insurance and co-pays, from already-taxed income. This includes the cost of long-term care insurance, up to certain limits based on your age.
- Uninsured medical expenses, such as an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs.
- Costs of alcohol- or drug-abuse treatments.
- Eye surgery, such as Lasik, when it is not just for cosmetic purposes.
- Medically necessary costs prescribed by a physician. For example, if your doctor recommended you put a humidifier in your home to help with breathing problems, the humidifier and additional electricity costs could be at least partially deductible.
- Some medical conference costs. You can count admission and transportation expenses to the conference if it concerns a chronic illness that afflicts you, your spouse or a dependent. Meals and lodging costs while at the seminar, however, are not deductible.
- Weight-loss programs for a specific disease diagnosed by a physician, such as obesity or hypertension.
Another way to get a tax break is with a medical flexible spending account, or FSA. An FSA lets you set aside before-tax money, up to a certain amount, with which to pay out-of-pocket medical expenses. FSA contribution limits are $2,750 for 2020 and 2021.
Two major benefits of the medical FSA:
- All medical expenses up to the limit receive the effective tax deduction.
- The FSA eliminates the requirement of itemizing deductions to receive tax benefits.
“Many employers offer plans that allow you to pay a portion of your medical expenses with pretax dollars,” says Valrie Chambers, associate professor of accounting at Stetson University in DeLand, Florida.
“This is a very good deal – almost a guaranteed 15 to 25 percent discount for most services. It helps to absorb the economic shock of an illness,” says Chambers, who strongly encourages workers with access to an FSA to sign up.
Other deductible medical expenses
If you have special needs, there are other costs you can write off, such as the cost of a wheelchair, crutches, equipment that enables a deaf person to use a telephone or devices that provide television closed-captioning. Don’t forget guide dogs for the blind or hearing-impaired, or the costs to retrofit your car with special hand controls or space to hold a wheelchair.
If you make renovations to your home for medical reasons, you can deduct the cost as a medical expense. Expenses related to making your home more accessible for a disabled resident also are deductible, but you likely won’t be able to write off the full costs.
Aging-in-place home remodels you can write off, include:
- Installing ramps.
- Widening doors and hallways, and lowering counters and cabinets.
- Adjusting electrical outlets and fixtures.
- Grading exterior landscape to ease access to the house.
- Adding a chairlift to get up and down stairs.
If the improvement increases the value of your property, that amount is subtracted from the project’s cost and the difference counts as a medical expense.
Here’s an example. Let’s say you spend $60,000 to install an elevator in your home because you have a heart problem and can’t walk flights of stairs anymore. Your home was worth $200,000; the elevator raised the value to $240,000. The cost of the elevator minus the increase in your home value is what you can deduct – in this case, $20,000.
Which medical bills are not tax-deductible?
Surgery that is strictly cosmetic, health club dues and weight-loss programs that aren’t medically necessary aren’t tax-deductible. Neither are hair transplant procedures or electrolysis.
For a complete list of tax-deductible and non-deductible medical expenses, check out IRS Publication 502. You might find a few things there that can help get you over the deduction threshold.
How to claim the medical expense deduction
If you have enough expenses to exceed the standard deduction for your filing status, you can start itemizing expenses, including medical bills, to reduce your taxable income.
Itemized medical expenses and other itemized expenses are tallied on Schedule A of IRS Form 1040. Schedule A is separated into sections for different categories of deductible expenses. Once you have totaled the expenses for each category, add them up and put the grand total on your Form 1040.