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Tuesday, October 17, 2017

Deducting Medical Expenses

By Justin J. Kumar

Medical expenses can take a bite out of your budget, especially if you have unforeseen emergencies that are not fully covered by your insurance. The Internal Revenue Service allows taxpayers some relief, making some of these expenses partly tax-deductible. To take advantage of this tax deduction, you need to know what counts as a medical expense and how to claim the deduction.


The IRS allows you to deduct qualified medical expenses that exceed 10% of your adjusted gross income for the year. Your adjusted gross income (AGI) is your taxable income minus any adjustments to income such as deductions, contributions to a traditional IRA and student loan interest. For example, if you have a modified adjusted gross income of $70,000 and $7,500 of medical expenses, you would multiply $70,000 by 0.10 (10 percent) to find that only expenses exceeding $7,000 can be deducted. This leaves you with a total medical expense deduction of $500 ($7,500 – $7,000).

 

To claim the medical expenses deduction, you must itemize your deductions. Itemizing requires that you not take the standard deduction, so you should only claim the medical expenses deduction if your itemized deductions are greater than your standard deduction.

 

The IRS allows you to deduct preventative care, treatment, surgeries and dental and vision care as qualifying medical expenses. You can also deduct visits to psychologists and psychiatrists. Prescription medications and appliances such as glasses, contacts, false teeth and hearing aids are also deductible.

 

Any medical expenses for which you are reimbursed, such as by your insurance or employer, cannot be deducted. In addition, the IRS generally disallows expenses for cosmetic procedures. You cannot deduct the cost of non-prescription drugs (except insulin) or other purchases for general health such as toothpaste, health club dues, vitamins or diet food, non-prescription nicotine products or medical expenses paid in a different year.

 

If you're self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income, rather than an itemized deduction, for premiums you paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy covering medical care, for yourself, your spouse, and dependents. In addition, you may be eligible for this deduction for your child who is under the age of 27 at the end of 2016 even if the child wasn't your dependent.

 

Did you know? The IRS also lets you deduct the expenses that you pay to travel for medical care such as mileage on your car, bus fare, and parking fees.


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