Medical expense deductions
Most taxpayers know that medical expenses are deductible but few of us ever actually benefit from the deduction. The catch? This deduction has two high hurdles:
- You must itemize deductions to write off medical expenses, and only about one-third of taxpayers itemize.
- Medical costs are deductible only after they exceed 10 percent of your Adjusted Gross Income (AGI). So if your AGI is $50,000, the first $5,000 ($50,000 x 0.10 of unreimbursed medical expenses doesn't count.)
There is a temporary exemption from Jan. 1, 2013 to Dec. 31, 2016 for individuals age 65 and older and their spouses. If you or your spouse is 65 years or older or turned 65 during the tax year you are allowed to deduct unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. The threshold remains at 7.5% of AGI for those taxpayers until Dec. 31, 2016.
Beginning Jan. 1, 2017, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of your adjusted gross income.
Although it seems difficult to claim these deductions, there are situations when it actually works out. Mostly when:
- You expenses are high perhaps due to a serious illness or injury, or just needing braces for a couple of teenagers.
- Your AGI is low maybe due to low taxable retirement income or being out of work for part of the year.
If you combine these two, you have a “perfect” combination for deducting medical expenses.