What Expenses Are Deductible?
When determining whether or not you qualify for the medical expenses deduction, it’s important that you know which expenses can be counted towards your total medical costs. These are the types of expenses that the IRS will allow you to claim if you qualify for this deduction:
- Preventative care
- Cost of treatment
- Cost of surgeries
- Dental care
- Vision care
- Visits with psychologists and psychiatrists
- Prescription medications and insulin
- Prescription appliances (glasses, contacts, hearing aids, etc.)
- Travel expenses associated with treatment subject to certain limitations (mileage on car, parking fees, plane fare, etc.)
When calculating the amount you’ve spent on medical care this year, only include the above types of expenses, and only if you have not been reimbursed for the expense.
What Expenses Are Not Deductible?
We’d also like to touch on a few common expenses that taxpayers believe are deductible, but aren’t. Some of these non-deductible expenses are:
- Cost of cosmetic procedures
- Non-prescription drugs (except insulin)
- Health club dues
- Vitamins
- Diet food
- Non-prescription nicotine products
While many of these products are essential to your basic health care, they are not deductible on your tax return. Additionally, remember that you cannot deduct any medical expenses for which you have already been reimbursed.
Threshold for Medical Expenses Deduction
Now that you have the information you need to calculate your total spent on medical care this year, it’s time to calculate whether or not you meet the threshold for the medical expenses deduction. The IRS only allows you to deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI). Your AGI is your taxable income minus adjustments like IRA contributions or student loan interest.
Let’s assume you’ve calculate your AGI to be $50,000. Using the guidelines given above, you’ve determined your total cost for medical expenses this year is $7,000. You will first need to multiply $50,000 by 0.075 to determine what 7.5% of your income is. In this case, it’s $3,750. Only expenses that exceed this number can be deducted. So, after subtracting $3,750 from $7,000 (the amount you spent on qualified medical expenses this year), you’ll see that you can deduct $3,250 of your medical expenses.
Note that the 7.5% threshold is changing for the 2019 tax year. On your next tax return, you will only be able to deduct qualified, non-reimbursed medical expenses that exceed 10% of your income.
Claiming the Medical Expenses Deduction
Even after you’ve calculated the amount you can deduct, ensuring you claim this deduction properly can be a bit tricky. The most important issue here is determining whether it is even beneficial to claim this deduction on your return. Claiming the medical expenses deduction requires you to itemize your deductions, so you will only want to claim it if the amount of your itemized deductions exceeds the standard deduction.
Our Provo CPAs can help you to determine if you qualify for the medical expenses deduction, and if claiming it will give you a greater benefit on your tax return. We’ll also ensure that every form is properly filled out and get your tax return filed on time. Contact us today to start planning for your 2018 tax return.