You might think that there's no way you can possibly have had enough medical-related expenses to be able to claim a health care deduction on this year's tax return. In order to take advantage of this opportunity, you need to have spent more than 7.5 % of your AGI (Adjusted Gross Income). And then, you can only claim the monetary amount above that figure. Many taxpayers will be surprised at just how much they spend on health care. I know with our growing family we're always (by “we're” I mostly mean my wife) keeping tabs on our health insurance costs. Our family is currently all through her employers coverage, and we've had to change a few times in the past year.
In today's economy, many people's income has remained the same, or even gone down. Unfortunately, the cost of health care keeps going up. Therefore, it is crucial to take a look at medical and dental expenses to see if you qualify for this possible deduction.
Tax Deductible Medical Expenses
In general, deductible medical expenses are ordinary costs you pay out of pocket for the health and well being of you, your spouse, and any dependents. These expenses include the following: payments for medical services provided by physicians and other legal medical practitioners. They include the costs of equipment, supplies, and diagnostic tools needed for these purposes. All medical procedures – surgeries, visits to the doctor, tests, and therapy – that is medically necessary for recovery or improvement of health is tax deductible. Approved medical expenses include, but are not limited to, the following:
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- Prescription Costs. You can include the amounts you pay for prescribed medicines and drugs. A prescribed drug is one that requires a prescription by a doctor. You can also include amounts you pay for insulin. Insulin is the only non-prescribed drug that is included in this category. While you can use money from your flex account to buy non-prescription drugs, they are not deductible.
- Co-payments. Typically you pay a co-payment every time you see any kind of doctor. These fees are all deductible. Lab fees are also included.
- Travel costs to receive medical care. Parking and tolls are also deductible, as well as the amounts you pay for transportation to get medical care. Keep a log of your mileage.
- Eyeglasses, contact lenses, laser eye surgery are all tax-deductible, as are hearing aids.
- Dental expenses fall under this category as long as the received treatment wasn't paid for by dental insurance. Cosmetic procedures, being unnecessary, are not tax-deductible, although necessary reconstructive procedures are.
- Insurance Premiums. You can include the portion of insurance premiums that you pay for health insurance plans through your place of work. Do not include in your medical and dental expenses any insurance premiums paid by your employer.
- Long-term Care Medical expenses include amounts paid for approved long-term care services and limited amounts paid for any qualified long-term care insurance contract.
Only the medical and dental expenses you paid this year can be included, regardless of when the services were provided. Do not include medical expenses that were paid by insurance companies or other sources, whether the payments were made directly to you, to the patient, or to the provider.
Taxpayers who keep careful records of medical and dental expenses may be able to substantially reduce federal income tax liability. Definitely take the time to review your medical costs for the year to discover whether or not you can save money by itemizing your deductions.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.