No one likes to think about medical emergencies or hardships, but the truth is, many people will face a situation at some point in their lives where insurance does not begin to cover all of the expenses incurred from a health issue.
During those situations, the IRS offers some relief to taxpayers in the form of deductions for certain levels of medical expenses.
When can I take the medical expense deduction?
You can only take the medical expense deduction under the following circumstances:
- You are itemizing your deductions via Form 1040, Schedule A.
- The amount of money you paid for the year in unreimbursed medical expenses is more than 7.5 percent of your adjusted gross income for the 2018 tax year. (So, if your adjusted gross income is $50,000, you could use this deduction if you paid more than $3,750 in unreimbursed medical expenses.)
Beginning with the 2019 filing year, that bar will get higher – you’ll only be able to deduct once you have qualifying expenses that reach more than 10 percent of your adjusted gross income.
How much can I deduct?
The medical expense deduction is based on that 7.5 percent level. You can only deduct those expenses that are higher than the set level.
In the example above, a person or family with an adjusted gross income of $50,000 could begin to consider a deduction once any unreimbursed medical expenses reach $3,750. However, you can only deduct the amount over that level. So, for a $4,000 medical expense, only $250 could potentially be deducted.
Once again, this will change for the 2019 tax year. Once the level of potential deduction is raised to 10 percent of adjusted gross income, then only any expenses over that 10 percent can be deducted.
For an AGI of $50,000, this will then mean that only expenses over $5,000 can be deducted.
What qualifies for the medical expense deduction?
Many types of expenses qualify for these medical deductions, including but not limited to:
- Preventative care
- Medical treatment and surgeries
- Residential nursing home care, when care is needed for medical reasons
- Inpatient drug and alcohol treatment
- Dental and vision care
- Psychological and psychiatric care
- Prescription drugs
- Glasses, contacts, false teeth, hearing aids, wheelchairs and other prescribed medical devices
- Travel for medical care, including mileage, public transportation and parking
However, there are some expenses that do not qualify. These include any expenses that are reimbursed, most non-prescription drug costs, most cosmetic procedure costs, general wellness expenses such as gym memberships, funeral or burial expenses, and more.
How can I tell if I can take a medical expense deduction?
The IRS has an online tool, “Can I Deduct My Medical and Dental Expenses?,” that may be helpful. If you’re unsure, though, talking to a tax professional is always the best way to figure out if these deductions are applicable to you.
Tax season is upon us. Call or email now to secure your appointment.