There’s nothing fun about medical bills — or, most likely, the reason you got them. But there’s one silver lining to medical expenses come tax time: They could lower your tax burden. That’s because certain medical expenses are tax-deductible.
The IRS rule says that you can take a medical expense deduction if your medical expenses exceed 10 percent of your adjusted gross income. If you or your spouse is 65 or older, the threshold is 7.5 percent. Your AGI is your income after adjustments such as deducting expenses like student loan interest, IRA contributions and alimony payments. The rules for deducting medical expenses are the same for those who have healthcare through the Affordable Care Act. If you have Obamacare, you can deduct medical and dental expenses including deductions for you, your spouse and your dependents.
How to Calculate Your Tax Deduction for Medical Expenses
You can deduct the amount you spent on certain types of medical care and products when that amount is above either 10 percent or 7.5 percent of your AGI, depending on your age. In plain math, calculating your medical expenses tax deduction looks like this:
For those age 65 and older:
Amount that’s tax-deductible = (your total medical expenses) – (AGI x 0.075)
For those under age 65:
Amount that’s tax-deductible = (your total medical expenses) – (AGI x 0.10)
The amount over that number is deductible.
Here’s a real-world example: Say you have an AGI of $50,000 and are 65 or older. You multiply $50,000 by 0.075 — that is, 7.5 percent — and get $3,750. That’s your “floor.” Now, say you had $6,750 in deductible medical expenses. Your allowable total for IRS medical deductions would be $3,000, should you choose to itemize your deductions rather than take the standard deduction.
Medical Expenses You Can Deduct
Right about now, you’re probably wondering which medical expenses are deductible. Good question, because not everything commonly thought to be medical passes the IRS test for tax-deductible expenses.
“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. To give you an even better idea, here’s a list of some — but not all — acceptable medical tax deductions, according to the IRS:
- Fees to doctors, surgeons, dentists, chiropractors, psychiatrist, psychologists and other medical professionals
- Medical insurance premiums beyond the portion your employer pays
- Long-term care insurance premiums, up to certain limits
- Long-term care
- Inpatient alcohol and drug treatment programs
- Ambulance service
- Weight loss programs for a specific disease diagnosed by a physician
- Modifications to your home for medical care, such as wheelchair ramps
- Nursing supplies, such as breast pumps
- Fertility treatments, pregnancy test kits and sterilization
- Insulin and prescription drugs
- Glasses, contacts, hearing aids, crutches, etc.
- Guide dogs for the blind or deaf
- Cosmetic surgery required as a result of a disease or accident
- Removing lead-based paint from a surface in poor repair that is within the reach of a child
- Admission and transportation to a conference concerning a chronic condition of yourself or someone in your family
- Psychiatric care
- Stop-smoking programs, excluding non-prescription drugs like nicotine gum or patches
Expenses That Don’t Count as Tax Deductions
Of course, not every expense that you see as medically related is one that the IRS would agree with. So, to avoid trouble with the taxman, don’t try to deduct non-qualifying medical expenses. You can’t include medical expenses for which you were reimbursed. That’s true whether you were paid back for medical expenses you incurred or if the payment was made directly to the hospital or doctor.
Here’s a partial list of other expenses that won’t qualify, according to the IRS:
- Funeral expenses
- Most cosmetic surgery
- Activities your doctor recommends to improve your general health, such as a vacation or dancing lessons
- Any illegal treatments or substances
- Nutritional supplements
- Toothpaste and other toiletries
- Nonprescription drugs, such as aspirin
- Nicotine patches or gum
Writing off medical expenses as deductions could make for a healthier bottom line on your tax return. But make sure you only include appropriate expenses, because an IRS audit is a stressful — and thus, unhealthy — way to start the new year.