Medical expenses can have a significant impact on your finances, especially if you have unforeseen illnesses or injuries arise in your family that are not covered by insurance. If you’ve found yourself with high medical expenses this year, you might be wondering if those expenses are tax deductible. And if so, just how much can you deduct? Here is a quick look at what you should know about deducting medical expenses on your tax return. However, knowing exactly what to deduct and ensuring you get the maximum benefit can be difficult, so we strongly recommend that you work with a tax expert in Provo.
Do You Qualify for Medical Expense Deductions?
For healthy families and individuals who only require basic medical care, deducting medical expenses is not something you need to consider. The IRS requires that your medical expenses exceed a certain percentage of your income before you can begin deducting those expenses, so it is usually only something you need to consider if you have had unusually high medical bills during the year.
For the 2018 tax year, you can only deduct qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI). Your AGI is your taxable income, minus any adjustments (IRA contributions, student loan interest, etc.).
As an example, let’s say your AGI is $50,000, and you have $7,000 in medical expenses this year. First, multiply $50,000 by 0.075; the answer, $3,750, is 7.5% of your income, and only expenses exceeding this number can be deducted on your tax return. So, after subtracting $3,750 from $7,000 (your total medical expenses), you will find that you can deduct $3,250 of medical expenses on your tax return.
Be aware that in 2019, you will only be able to deduct allowable medical expenses that exceed 10% of your AGI.
Which Expenses Are Deductible?
Not every dollar you spend on your medical care is considered deductible; this means that you need to ensure you are only adding up qualifying expenses when determining whether or not your expenses exceed 7.5% of your income. Here are the types of expenses that are considered qualifying medical expenses:
- Preventative care
- Dental care
- Vision care
- Visits to psychologists and psychiatrists
- Prescription medications
- Prescription appliances (glasses, contacts, hearing aids, etc.)
- Travel expenses required to receive treatment subject to certain limits (mileage on car, parking fees, plane fare, etc.)
Note that the above medical expenses only qualify for deduction if you have not been reimbursed by your insurance or your employer.
What’s Not Deductible?
There are certain types of medical expenses that many people try to deduct, but which don’t qualify according to the IRS. These include:
- Expenses for cosmetic procedures
- Non-prescription drugs (except insulin)
- Health club dues
- Diet food
- Non-prescription nicotine products
Expenses associated with general health care, expenses reimbursed by insurance, or expenses paid in a different year are never deductible.
Deducting Your Medical Expenses
If you believe you qualify to deduct medical expenses, it’s important that you do so properly in order to obtain the maximum benefit from this deduction. The primary thing to be aware of is that, to claim this deduction, you will have to itemize all of your deductions; this means you should only claim the medical expenses deduction if the amount of your itemized deductions exceeds your standard deduction.
A tax expert in Provo can help you to determine which type of deduction will offer you the maximum benefit on your return. If our CPA determines that claiming the medical expenses deduction is in your best interest, and you qualify for it, we will help you to complete the necessary forms to include with your return. Contact us today to set up an appointment, and we will review your expenses and finances so you can be prepared to file your 2018 tax return.