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 article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
Deduction value for medical expenses
The IRS allows you to deduct qualified medical expenses that exceed 7.5% of your adjusted gross income for 2017 and 2018. Beginning Jan. 1, 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.
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 $45,000 and $5,475 of medical expenses, you would multiply $45,000 by 0.075 (7.5 percent) to find that only expenses exceeding $3,375 can be deducted. This leaves you with a medical expense deduction of $2,100 (5,475 - 3,375).
Which medical expenses are deductible?
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.
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.
What's not 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.
Claiming the medical expenses deduction
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 (TurboTax will do this calculation for you).
If you elect to itemize, you must use IRS Form 1040 to file your taxes and attach Schedule A.
- On Schedule A, report the total medical expenses you paid during the year on line 1 and your adjusted gross income (from line 38 of your Form 1040) on line 2.
- Enter 7.5% of your adjusted gross income on line 3.
- Enter the difference between your expenses and 7.5% of your adjusted gross income on line 4.
- The resulting amount on line 4 will be subtracted from your adjusted gross income to reduce your taxable income for the year.
- If this amount, plus any other standard deductions you claim, is less than your standard deduction, you should not itemize.
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