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How To Deduct Medical Expenses on Your Tax Returns

By Edited Aug 6, 2015 0 0

It's no secret that paying a hefty medical bill can really jeopardize your monthly budget, not to mention your week-end shopping plans and, most importantly, a good mood. Sometimes these bills come unexpectedly sneaking into your mailbox, other times you know about them upfront before you even get to meet the doctor. The reality is that with the recent unemployment stats on the rise and skimpy health plans provided by the employers, many of us end up spending thousands of dollars on medical expenses year in and year out.

If you itemize your deductions on your tax return, the tax law allows you to deduct the medical and dental expenses you incur to the extent the total is more than 7.5% of your adjusted gross income.

Let's use a simple example:

Your Adjusted Gross Income (AGI) is $50,000 (Form 1040, line 37)
Your Total Medical Expenses for the Year are $ 5,000 (based on your records)
7.5% of your AGI is $3,500 (which is $5,000*7.5%)

Your Medical Expenses Deduction is $5,000-$3,500 or $1,500 (reported on Form 1040, Schedule A).

So now that you have a better idea how much to expect back for all those medical and dental bills you have paid, ensure you understand what can and cannot be deducted. Yes, that's right, not all medical expenses are considered "eligible" for the deduction, but you will be surprised by some categories that now qualify as deductible medical costs.

Medical and Dental Expenses You Can Deduct:

  • Payments for diagnosis, cure, mitigation, treatment, and prevention of disease;
  • Amounts that you pay for your participation in a smoking-cessation program and for the prescribed drugs in connection with such program;
  • Weight-loss program expenses as long as you enrolled into the program for the purposes of the treatment of disease diagnosed by medical professionals (obesity, hypertension, heart disease, etc…). Note: You can deduct the fees you pay for the program, but not the cost of food;
  • Laser eye surgery expenses;
  • Birth control pills prescribed by your doctor;
  • Some fertility treatment and legal procedures to prevent having children (for detail refer to the IRS Publication 502);
  • Capital expenses for improvements to your residence that are necessary for medical care;
  • Diagnostic devices and bandages;
  • Hospital services fees;
  • Transportation for needed medical care;
  • Wages for nursing services;
  • Special education service fees (see IRS Publication 502);
  • Prescription medicines (prescribed by a doctor) and insulin;
  • Transportation for medical care purpose.

Medical and Dental Expenses You Can NOT Deduct:

  • Baby sitting and child care;
  • Maternity clothing and diaper service;
  • Cosmetic or plastic surgery done for purely cosmetic reasons;
  • Teeth whitening procedures;
  • Weight-loss expenses not intended to treat obesity or other disease;
  • Nutritional supplements and vitamins;
  • Toothpaste, cosmetics and other toiletries;
  • Life insurance;
  • Funeral, burial and cremation expenses
  • Over-the-counter medicine;
  • Flexible Spending Account Contributions;
  • Health Savings Account payments;
  • Health club dues;
  • Social activities (swimming, dancing, etc…);
  • Marijuana and other controlled substances even if recommended by a doctor.

If you would like to learn more or get more clarity on the deductibility of the below expenses, your best bet is reading up on the IRS Publication 502, which can be found at http://www.irs.gov/publications/p502/index.html.

So if you believe that you can benefit from the medical costs deduction, the next step is to ORGANIZE yourself and get your medical records in order. There is no guarantee that the IRS won't decide to audit your taxes, which is why you want to be ready with the documentation that proves the validity of the expenses you are claiming.

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