When tax season rolls around, many people wonder if they can deduct their medical expenses from their taxes. It’s a valid question, as medical costs can quickly add up and any relief from the financial burden is welcome. In this article, we will explore the ins and outs of medical expense deductions and provide you with the information you need to make informed decisions this tax season.
IRS Guidelines For Deducting Medical Expenses
Before we dive into the specifics of which medical expenses are tax deductible, it’s important to understand the guidelines set forth by the Internal Revenue Service (IRS). According to the IRS, you can deduct your medical expenses if they exceed 7.5% of your adjusted gross income (AGI). This means that you can only deduct the portion of your medical expenses that exceeds 7.5% of your AGI.
For example, if your AGI is $40,000 and you have $10,000 in eligible medical expenses, you may deduct $7,000 if you itemize your taxes. That’s because 7.5% of $40,000 is $3,000, so anything over that amount may be claimed.
Which Medical Expenses Are Tax Deductible?
Now that we know the basic IRS guidelines, let’s look at which medical expenses are eligible for tax deductions. The IRS allows deductions for a wide range of medical expenses, including but not limited to:
- Doctor and dentist visits
- Hospital stays
- Prescription medications
- Medical equipment and supplies
- Lab tests and X-rays
- Mental health services
- Long-term care services
- Transportation costs for medical purposes
- Insurance premiums
It’s important to note that these deductions are only applicable if they are not reimbursed by insurance or any other source. Medical expenses paid using money from a flexible spending account (FSA) or a health savings account (HAS) are also ineligible. Additionally, certain cosmetic procedures and over-the-counter medications are not eligible for deductions unless they are prescribed by a healthcare professional.
How to Claim Medical Expenses on Your Tax Return
When it comes time to file your tax return, you’ll need to itemize your deductions using Schedule A (Form 1040). Include the total of all your eligible medical expenses on line 1. Your AGI should be included on line 2. Next, calculate how much 7.5% of your AGI is and place it on line 3. On line 4, you’ll need to include the amount you are eligible to claim, which is determined by subtracting line 4 from line 1. Lastly, add up all deductions you are claiming on Schedule A to determine how much you can subtract from your taxable income for the year.
Generally, you should only itemize if the total of all your deductions is greater than the standard deduction for your filing status. If it’s not, you should take the standard deduction instead.
Tips For Maximizing Tax Deductions
If you want to maximize your medical deductions, try to schedule costly medical procedures so they fall in the same tax year. Be sure to keep good records, too. This includes keeping copies of medical invoices and receipts, as well as mileage logs for any travel required. If you’re unsure about how to handle your deductions or have unique circumstances that require expert advice, it’s always a good idea to seek professional help. A certified tax professional can guide you through the process, ensuring that you take full advantage of all eligible deductions while staying compliant with IRS regulations.