If you itemize your deductions and anticipate including some of your medical and dental expenses, then IRS Publication 502, "Medical and Dental Expenses," can help you determine which expenses qualify in the current tax year. After you total all of your deductible medical and dental bills, you can deduct only the portion that exceeds 10 percent of your Adjusted Gross Income (AGI) for 2019 (7.5 percent for 2017 and 2018).
What are medical and dental expenses?
IRS Publication 502 defines medical and dental expenses as the costs you pay to receive treatments that prevent, diagnose or treat diseases or other physical and mental ailments. Deductible costs also include equipment expenses, diagnostic services and the supplies necessary to service these conditions.
Supplies will include any prescription medication you need plus insulin, which is the only deductible nonprescription medication allowable. Elective and cosmetic surgeries or teeth whitening services are not covered under the IRS definition as a medical or dental expense.
When you can take the deduction
Under the guidelines set forth in IRS Publication 502, you can claim the deduction in the tax year you actually pay the expense. For example, if you paid for an appendectomy in the current tax year and the surgery occurred in the beginning of the next tax year, report the expense on your current tax return. If an operation performed in the current tax year was paid for in the next tax year—claim the deduction in the next tax year. The expense is always reported in the year it was paid, not the year the services are performed.
Deducting insurance premiums
Publication 502 also allows you to deduct the insurance premiums you pay for medical and dental coverage. However, if your employer pays for a portion of your premiums, you can only deduct the amounts you are responsible for. If you are self-employed and pay 100 percent of the insurance premiums, you can include the premiums you pay for yourself, a spouse and your dependents as an adjustment to income rather than as an itemized deduction. Qualified insurance premiums for self-employed individuals are not subject to the 10 percent AGI limitation for for 2019 (7.5 percent for 2017 and 2018).
How to claim the deduction
To claim a deduction for your medical and dental expenses, you must file your tax return on Form 1040. All expenses other than insurance premiums for self-employed taxpayers must be reported on a Schedule A attachment with your other itemized deductions. Self-employed taxpayers can deduct their insurance premiums directly on the Form 1040. However, if you incur expenses in addition to these insurance premium payments, they too must be reported on the Schedule A.
Additionally, for any insurance or medical expense to be deductible, it has to be paid with after-tax dollars. This means that insurance premiums withheld from you paycheck using pre-tax money or medical costs paid using a Health Savings Account (HSA) are not eligible for a tax deduction.
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