What Medical Expenses Can I Deduct From My Taxes?

Understanding Medical Expense Deductions: IRS Publication 502 Highlights

 

If you’re one of many taxpayers looking to maximize deductions and reduce your taxable income, understanding what you can and cannot deduct as medical expenses is essential!

 

Here’s what you need to know particularly regarding itemizing medical and dental expenses on your Schedule A (Form 1040).

 

What’s New?

• Standard Mileage Rate:  If you use your vehicle for medical reasons—for example, driving to doctor appointments—the allowable deduction is now  21 cents per mile. Be sure to keep thorough records of your trips and mileage.
• COVID-19 Related Expenses:  The IRS continues to allow you to deduct amounts paid for personal protective equipment—like masks, hand sanitizer, and wipes—when purchased primarily to prevent the spread of COVID-19.

Who Can Deduct Medical Expenses?

 

You can only claim medical and dental expenses that exceed  7.5% of your adjusted gross income (AGI). Only the portion of your expenses above this threshold may be claimed as an itemized deduction.

 

What Expenses Can Possibly Be Deducted?

 

Some common deductible medical expenses include:

• Insurance premiums you pay for medical, dental, and long-term care coverage (with important exceptions explained below). These deductions have monetary caps depending on your age.
• Qualified Long-Term Care Services
• Premiums for Medicare Part B and Part D.
• Premiums for Medicare Part A, but only if you voluntarily enrolled and aren’t covered by Social Security or a qualifying government plan.
• Out-of-pocket costs for doctor visits, prescriptions, and necessary treatments.
• Certain costs related to personal protective equipment used to prevent COVID-19.
• Some prepaid insurance premiums, if paid under specific terms (e.g., premiums paid before age 65 for coverage after age 65, under a 10-year or longer plan).

What Cannot Be Deducted?

• Employer-Paid Premiums:  If your employer pays your insurance premiums (and doesn’t include them in your gross income), you can’t claim those amounts. This includes many flexible benefits and premium conversion plans.
• Health Reimbursement Arrangements (HRA):  Amounts reimbursed through an HRA are not deductible.
• Payroll Taxes for Medicare Part A:  If you’re covered under Social Security and the Medicare tax is withheld from your paycheck, you cannot deduct those taxes.
• Health Coverage Paid with Tax-Free Retirement Distributions:  Retired public safety officers may not deduct premiums paid with tax-free retirement plan distributions.
• Reimbursed Expenses:  If you are reimbursed for a medical expense by insurance or another source, you cannot claim that amount.

Actions for Taxpayers

• Keep Detailed Records:  Document your expenses, retain all receipts, and note which items have been reimbursed elsewhere.
• Review Your Eligibility:  Only claim the deductible expenses for yourself, your spouse, or your dependents that are not covered by insurance or other tax-free sources.
• Consider Prepaid Premiums:  If planning for retirement, certain prepaid insurance premiums may be deductible—ask your CPA if this applies to you.

Helpful IRS Resources

• Visit  IRS.gov/Pub502  for the most up-to-date information, including legislative changes.
• Download forms and checklists at  IRS.gov/Forms.
• Use the  Interactive Tax Assistant  if you have specific questions.
• Always consult your CPA with your questions as well.

Leveraging Every Available Medical Deduction?

 

Tax rules are complex and change frequently. A trusted tax advisor can help you assess what medical expenses you can deduct and how to keep proper records for tax time. Stay proactive and informed to maximize your financial health and minimize your tax liability.

 

Disclosure: I am not a tax expert, nor do I claim or even want to be.  However, that doesn’t give me the excuse to turn a blind eye to anything tax related. This blog post is meant to point you in the right direction and to open up a dialogue with your CPA. Please make sure to always consult with a tax expert as everyone's situation is different.