Medical expenses can take a huge toll on your budget. Oftentimes, it is hard to prepare for unexpected health emergencies and the financial impact they can have.
And, when it comes to the health of you and/or your loved ones, you cannot simply refuse vital medical care.
To that end, you can purchase health insurance to assist you in paying for medical expenses. Unfortunately, not everyone has health insurance. And, even those that have health insurance may still end up with big bills for their medical expenses. Such is the sorry state of medical care in the U.S.
This issue leads to one of the most frequently asked questions about taxes which is… are medical expenses tax deductible? Like many issues related to taxes, the answer to that question isn’t simple. But below you’ll find a clear, plain English answer.
Are Medical Expenses Tax Deductible?
The answer to this question is that it depends. Many medical expenses are tax deductible. However, not all medical expenses qualify as tax deductible.
If you, your spouse, or any dependents have incurred large medical bills, save your receipts. They may help you save money at tax time. You can deduct a variety of healthcare and medical expenses if you itemize your deductions rather than taking the standard deduction.
According to the IRS, if you itemize your deductions on Schedule A (Form 1040), Itemized Deductions for a taxable year, you may be able to deduct expenses for medical and dental care for yourself, your spouse, and your dependents during that year. You may only deduct the portion of your total medical expenses that exceed 7.5 percent of your adjusted gross income.
Medical Expenses That Are Tax Deductible
According to the IRS, medical expenses are primarily for the purpose of alleviating or preventing a physical or mental disability or illness. To be tax deductible, medical expenses must be medically necessary. They cannot be elective cosmetic procedures.
Tax law defines medical expenses as costs associated with diagnosing, curing, mitigating, treating, or preventing disease, as well as treatments affecting any part or function of the body. The IRS allows you to deduct as qualifying medical expenses unreimbursed expenses for preventative care, treatment, surgeries, and dental and vision care.
You can also deduct unreimbursed expenses for psychological and psychiatric consultations. Prescription medications and appliances such as glasses, contacts, false teeth, and hearing aids that are not reimbursed are also deductible.
Additionally, the IRS allows you to deduct travel expenses for medical care. This includes car mileage, bus fare, and parking fees. They also cover the cost of health insurance premiums (if they are not deducted from your paycheck pre-tax).
Medically necessary home improvements are tax deductible as well. The IRS may consider the costs of renovating your home or installing special equipment to assist a physically disabled resident to be a medical expense.
Ramps, widening doorways or hallways to accommodate wheelchairs, and modifying bathrooms or stairwells, including lifts and handrails, all qualify for a full medical deduction if they do not increase the property’s value.
Medical Expenses That Are Not Tax Deductible
But any medical expenses for which you receive reimbursement, such as from your insurance or employer, are not tax deductible. Additionally, the IRS generally will not all you to deduct cosmetic procedure expenses.
Nonprescription drugs (except insulin) and other purchases for general health, such as toothpaste, health club dues, vitamins, diet food, and nonprescription nicotine products, are typically not tax deductible.
If you pay for medical expenses with funds from a flexible spending account or a health savings account, those expenses are not deductible. That is because the funds in those accounts are already tax-favored.
If you have questions about what medical expenses are and are not tax deductible, we recommend you discuss them with your accountant.