Can I Deduct Medical Expenses?

Mar 20

Medical expenses can take a massive chunk out of your budget and add up quickly, putting a strain on your personal finances. Most taxpayers with mounting medical bills want to know the answer to the question: “Can I deduct medical expenses from my taxes?”

The answer is yes and no. It depends on a few factors and rules set by The Internal Revenue Service (IRS). Additionally, some expenses are deductible, and some are not.

This blog post will help you better understand what you need to know about deducting medical expenses from your taxes.

Are Medical Expenses Tax Deductible?

Yes, medical expenses are deductible from your taxes, and the IRS allows taxpayers to itemize their deductions for the taxable year. This includes qualifying and unreimbursed medical and dental care expenses you have paid for yourself, your spouse, and your dependents.

You can include only the medical expenses you incurred during the year. Any medical fees you have paid in advance or that you have paid after the end of the taxable year cannot be included for that year.

To determine the qualifying medical expenses deduction, you need to subtract the payments compensated for by your insurance or any other reimbursements you received from the total medical expenses you paid during the tax year. This applies whether you obtained the reimbursement personally or your insurance company issued it to the doctor, hospital, or another healthcare provider on your behalf. The difference is the amount you can list as a medical expense deduction.

When computing your medical expense deduction, you can deduct only the amount of your unreimbursed medical expenses exceeding 7.5 percent of your adjusted gross income (AGI). For example, suppose your AGI is $50,000, and you have spent $6,000 in medical expenses for the year. You need to multiply $50,000 by 0.075 (7.5 percent) to get your threshold amount, which is $3,750. You can subtract the threshold amount from your total medical expenses to get your allowable deduction amount, which in this case would be $2,250 ($6,000 minus $3,750).

You can include your qualifying medical expenses deduction on your Form 1040 Schedule A, Itemized Deductions. Generally, the lower your AGI is, the more medical expense deductions you can take.

Which Medical Expenses Are Deductible?

The IRS defines medical expenses as “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease.” These also include payments made for treatments affecting any structure or function of the body.

Medical expenses that may qualify for a deduction include the following.

Payments for Medical Care

These are payments made where medical care is the primary purpose of the expenditure, including payments made to doctors, surgeons, dentists, psychologists, psychiatrists, chiropractors, and even nontraditional healthcare practitioners for their professional medical services. Inpatient hospital care, including meals and lodging, is also included in deductible medical expenses.

Residential nursing home care is also a qualifying medical expense if the primary reason for admission to the nursing home is the availability of medical care. If not, the deductible expenses are restricted to the costs associated with medical care.

Home care and nursing services are also deductible expenses, including the wage you give to a nurse or home health care worker as long as they provide medical services. You can also include the costs of the attendant’s meals and additional household upkeep expenses, such as additional rent or utilities to accommodate the attendant.

Long-term care services for chronically ill patients are also deductible. These include payments for nursing care services, adult daycare, and assisted living expenses.

Surgeries related to cosmetic purposes are not deductible. However, medically necessary surgeries that improve the body’s function or prevent and treat diseases are deductible, such as:

Eye Surgery: Vision correction surgery and other vision enhancement procedures that improve your eyesight are deductible.
Breast Reconstruction Surgery: After a mastectomy due to cancer, the costs of breast reconstruction surgery, prostheses, and other related procedures are deductible.
Organ Transplants: Expenses incurred due to organ transplants may be deductible. Organ donors may also deduct their travel, lodging, and meal expenses when donating the organ.
Vasectomy: A vasectomy is a deductible medical expense if intended to improve health or prevent diseases.
Fertility Enhancement: Expenses related to fertility treatments, such as in-vitro fertilization, are deductible. This applies to yourself, your spouse, or your dependent.

Physical examinations are also deductible even if you’re not sick at the time of the exam. This includes eye exams, X-ray scans, diagnostic tests, laboratory fees, and other tests ordered by a doctor or healthcare provider.

Aside from physical health services, you can also deduct mental health services such as counseling, psychotherapy, and other treatments for emotional or behavioral disorders. These include psychiatrists, psychologists, licensed social workers, and family counselors. Payments for psychiatric care to support a mentally ill dependent are also deductible.

Payments for Treatment Programs

Payments for substance addiction treatment, alcohol abuse treatment, and smoking cessation programs are also deductible. These can include the costs of inpatient programs, prescription medications, medical treatments, and behavioral therapies necessary to treat addiction.

Acupuncture treatments are also deductible if the therapy is for treating a medical condition or illness.

The costs of weight loss programs are also includible if the primary purpose is to treat a disease diagnosed by a physician, such as obesity, diabetes, heart disease, or other medical conditions. This does not include the costs of diet foods items or payments for health club memberships.

Payments for Drugs, Supplies, and Appliances

Payment for prescription drugs and insulin are also deductible. Birth control pills and other contraceptives are also deductible if prescribed by a doctor. Over-the-counter medications, however, do not qualify as medical expenses.

Expenses related to medical supplies such as bandages, crutches, first aid kits, oxygen tanks, breast pumps, and blood sugar test kits are also deductible.

Medical appliances such as prescription or reading glasses, contact lenses, false teeth, hearing aids, batteries, wheelchairs, wigs, or prosthetic devices like artificial limbs also qualify as deductible medical expenses.

Capital expenses, such as the cost of installing ramps, elevators, or other home improvements necessary to accommodate physical disabilities, are also deductible.

Specific personal items may also be included, provided they aid in a particular medical condition. For example, braille books and magazines help the visually impaired, and special telephones and televisions support the hearing disabled.

Moreover, payments for a guide dog or service animals trained to assist those who are visually impaired, hearing disabled, or otherwise physically disabled are also deductible. This includes veterinary care, food, grooming, and any additional cost to ensure the well-being of the service animal so that it can perform its duties.

Payments Associated With Transportation, Trips, and Conferences

Transportation costs relevant to obtaining medical care are deductible. This includes fares for taxis, buses, trains, or ambulance services. This also applies to transportation using a personal car, including gas, oil, standard mileage rate, tolls, and parking fees.

Costs of trips to another city for medical care services are also deductible, including lodging and meals for the person receiving medical care and their companion.

Payments associated with attending medical conferences that discuss specific chronic diseases or treatments that you, your spouse, or your dependent suffer from can also be deducted. You may remove the costs of your conference registration fees and travel expenses, but this does not include the costs of meals and lodging while attending the medical conference.

Payments for Insurance Premiums

Premium payments for qualified health insurance and long-term care policies are deductible medical expenses. Medicare Part A, B, and D payments may also be deductible. However, payments you make to Health Savings Accounts (HSA) and Archer Medical Savings Accounts (MSA) are not includible.

Which Medical Expenses Are Not Deductible?

Despite having a long list of deductible medical-related expenses, not all of them can be written off your tax report. Here are some common non-deductible medical expenses.

Reimbursed Expenses

Generally, medical expenses are considered tax-deductible. However, your insurance provider might reimburse you for certain medical expenses, or your employer might have an employee’s compensation policy to cover your medical costs.

In these cases, the authority will see it as if you have not incurred any medical expenses because you’re receiving the money back from your insurance provider or employer.

You cannot deduct these reimbursed expenses as a different party has already repaid your costs.

Cosmetic Procedures

Plastic or cosmetic surgeries, such as rhinoplasty, breast augmentation, liposuction, and eyelid surgery, are not critical medical procedures and are mainly done for aesthetic enhancements. Medically unnecessary or elective procedures like these do not qualify as medical expenses, and you cannot deduct them from your taxes.

However, authorities may consider a partial or double mastectomy to remove a malignant tumor or reconstructive surgery to restore body parts after a medical condition as necessary medical treatments and you might be able to claim deductions for them.

Nonprescription Drugs

Many people take various supplements to enhance their health, such as vitamin C to support the immune system or vitamin E to improve their skin texture. However, these are not necessarily medical treatments and cannot be written off as deductible expenses.

Suppose your medical provider prescribes supplements to help with your condition, such as iron supplements for anemic patients or vitamin D to reverse osteomalacia. In that case, you may deduct them as medical expenses.

Burial Expenses

Burial or funeral expenses are non-deductible expenses. However, specific state regulations and tax laws allow deductions for funeral-related expenses in certain estates. For example, you can claim tax deductions for funeral costs in New York if your taxable estate is worth $5.85 million or more.

Programs To Improve Health and Well-being

Attending health and wellness improvement programs, seminars, or classes is vital to learn more about taking better care of yourself and your family. However, these expenses are not considered necessary medical expenditures and cannot be deducted from your taxes.

How To Claim the Medical Expense Deduction

To claim deductions on medical expenses, you must itemize your deductions when filing a tax return instead of claiming the standard deduction. Most taxpayers itemize their deductions only if the amount exceeds the standard deduction.

If you decide to itemize your deductions, you must accomplish Form 1040 Schedule A. Here’s how you can do that:

On Line 1, report the total medical and dental expenses incurred during the tax year
On Line 2, write down your adjusted gross income (AGI)
On Line 3, multiply your AGI by 75 percent or 0.075 and enter the answer
On Line 4, subtract the amount you calculated on Line 3 from the total expenses on Line 1

The result of this calculation is what you can deduct as a medical expense for your tax return. Keep all receipts, records, and invoices from medical-related expenses to support your claims. If your total medical and dental expenses are less than 7.5 percent of your AGI, you won’t be able to claim the deduction as you did not reach the threshold.

You can add your total deductible medical expenses with your other itemized deductions and compare them to the standard deduction. The standard deduction for 2022 is $12,950 for single taxpayers, $25,900 for married couples filing jointly, and $19,400 for head-of-household filers. You can benefit from claiming itemized deductions if your total itemized deductions are higher than the standard deduction.

If You Think You Have Deductible Medical Expenses, Contact Core Group Today

If you think your medical expenses are tax-deductible, you must consult with tax experts who can help you evaluate your situation and determine which deductions apply to you.

Core Group provides the best professional advice regarding filing taxes, understanding deductions, and more. Our team of experienced tax professionals can help you maximize your deductions and save more money.

Core Group