Tax Debt Relief

What Are Medical Tax Deductions and How Can You Claim Them?

medical tax deductions
Written by fritzie

Half of those with health insurance coverage have to pay a deductible of $1,000 or more before their coverage even starts.

Just one unexpected medical bill can leave you scrambling and wreck your budget.

One small consolation in the face of these medical expenses is that you can deduct medical expenses on your income taxes each year.

But how much can you deduct? And does it actually help?

Read on to find out how medical tax deductions work and how to take advantage of them.

What Are Tax Deductions?

Tax deductions are items that you subtract from your income before you determine how much you owe in taxes.

The benefit of tax deductions is that they lower your overall income. The lower your income is, the less in taxes you have to pay. For example, if your total annual income is $40,000 and you have $3,000 in deductions, you will be taxed on $37,000.

Obviously, if your income is lower, you will pay less in taxes. Deductions can help you even more, though, by putting you in a lower tax bracket.

For example, with a $40,000 annual income, you would be in the 22 percent tax bracket if you filed your 2018 taxes as an individual. If you deduct $3,000, your income is $37,000, which places you in the 12 percent tax bracket.

Are Medical Expenses Deductible?

You can take a medical expense deduction for many of your health care expenses. This may include your health insurance premiums. This can be particularly helpful if you’re self-employed. Even if you are traditionally employed, though, you may be able to deduct your medical expenses.

Some of the health care expenses you can deduct include:

  • Payments you make to medical professionals. This includes doctors, surgeons, chiropractors, dentists, psychiatrists, psychologists, and even nontraditional medical practitioners
  • Payments for hospital care
  • The cost of prescription medications
  • The cost of participating in a weight-loss program
  • The cost of transportation to and from medical appointments
  • The cost of acupuncture treatments
  • Payments for dentures, prescription glasses, contact lenses, hearing aids, wheelchairs, crutches, and service animals
  • In some situations, you can deduct your health insurance premiums

What Health Care Costs Are Not Deductible Medical Expenses?

Unfortunately, some health care costs can’t be deducted. You can’t deduct over-the-counter medications, for example. This can be frustrating if you take a medication that used to be offered with a prescription but is now available over-the-counter.

Cosmetic surgeries are also not usually deductible. There may be exceptions, though, if your cosmetic surgery is medically necessary. You may be able to deduct a breast reconstruction surgery after breast cancer surgery, for example.

You can’t deduct funeral expenses. You also can’t deduct personal care items such as toothpaste and toiletries. You also can’t deduct nicotine gum and patches that aren’t prescribed by a physician.

You also can’t deduct any payments that your health insurance reimburses you for. For example, if you pay $1,000 toward a hospital bill and your health insurances sends you $500 to reimburse you for what you paid, you can only deduct the remaining balance of $500. You can’t deduct the full $1,000 that you initially paid.

When Can You Deduct Medical Expenses?

If you have health care expenses, you may be wondering, “Can I write off medical expenses?”

The answer depends on your total medical expenses and your total income. For the 2018 tax year, you can deduct your medical expenses if they are more than 7.5 percent of your income. You can only deduct the amount that exceeds that 7.5 percent threshold.

If your adjusted gross income, which is your income after deductions, is $50,000 for the year, then you would need to have more than $3,750 to deduct your medical expenses. If you had $5,000 in medical expenses, then you could deduct $1,250 in health care expenses.

The big picture is a bit more complicated, though. The IRS offers a standard deduction, which for the 2018 tax year is $12,000 if you file individually and $24,000 if you are married and file jointly.

Your health care deductions and other itemized deductions must total more than the standard deduction for a health care deduction to save you money.

If you’re filing as an individual, for example, your itemized deductions should be more than $12,000 for it to make sense to take itemized deductions.

How Do You Claim Medical Tax Deductions?

The best way to determine whether you should itemize or take the standard deduction is to prepare your taxes both ways. Compare the two outcomes and see which is better for you.

To write off your health care expenses, you need to itemize your deductions using Form 1040 Schedule A.

On the form, you report the total expenses you paid over the year and your adjusted gross income. You figure out 7.5 percent of your adjusted gross income and then subtract that total from your medical expenses. The amount that is left is the amount you can deduct, along with your other itemized deductions.

Compare the total of your itemized deductions with the standard deduction. If your total itemized deductions are higher, then you should use the itemized deductions when you file your taxes.

Other Ways to Save Using Health Care Costs

You can also save on taxes if you have a flexible spending account through your employer. Your contributions to your flexible spending account are taken out pre-tax, so they lower your taxable income. You can contribute up to $2,650 per year.

You can also set up a health savings account. These contributions are pre-tax. You can only set up a health savings account if you have a high-deductible health insurance plan. You can contribute up to $3,450 as an individual or up to $6,900 as a family.

Learn More About Deductions

Medical tax deductions are just one strategy to save on your taxes. If you have children, there are other tax credits you can take advantage of. You can also deduct charitable contributions and the interest you pay on student loans.

For more information on tax deductions, tax credits, and more, review our information. For example, if you think you may have overpaid on your taxes in the past, you may be able to file an amended return and get a refund.

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