Is It Worth Claiming Medical Expenses On Your Taxes?
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Medical Expense Deduction: A Complete Guide
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Is it worth claiming medical expenses on your taxes? Well, for most Americans, medical expenses take up a big chunk of their yearly budget. Still, many people don’t have a clear idea of which specific expenses can be deducted when filing their taxes. Add to that how you need to use a wholly different tax filing procedure if you want to claim these deductions, and you get an idea of why people don’t want to bother with the whole thing in the first place.
Still, being able to deduct medical and dental costs from your taxes can be extremely helpful for some families and even single taxpayers because these costs can be catastrophically high, so any amount of relief they get can make a huge difference. If you think these conditions apply to you, then this is the guide for you. We will go over the legal definition of what medical expenses are, whether they are tax deductible or not, how to identify eligible medical costs, and plenty of tips on how to maximize your chances of deducting them from your taxes.
Are Medical Expenses Tax Deductible?
Some medical expenses are considered tax deductible by the IRS when you itemize your deductions instead of claiming the standard deduction’s flat amount. According to IRS rules, medical expense deductions are only allowed if they represent over 7.5% of your Adjusted Gross Income (AGI), so you first have to make sure that your out-of-pocket medical expenses amount to more than that before you start claiming deductions.
According to the IRS, a medical expense is the cost for the “diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any part of the function of the body.”
If you’re itemizing your deductions for the purposes of deducting medical expenses, you cannot take the standard deduction, so you should be absolutely sure that your medical expenses for that year go over the required 7.5% of your AGI; otherwise you’re not really getting any tax benefits and are complicating your return for no real reason.
Is It Worth Claiming Medical Expenses On Taxes?
We really don’t want to give you the cliché “it depends” answer, but it really does depend on a couple of circumstances. You also have to consider your filing status; married couples stand to get bigger medical expense deductions than single filers, but doing so would lock you out of qualifying for other tax breaks.
Let’s look at all the factors above in one example. Say that you’ll file jointly with your spouse, with your combined AGI being $100,000; since medical deductions are only allowed for amounts over 7.5% of your AGI, you would need to have spent at least $7,500 or more to claim a deduction. Therefore, you would not be able to deduct a single dollar out of your $5,500 medical bill.
Things might be different if you were filing separately. Say that you have an AGI of $75,000 and your spouse has one of $25,000. If the medical expenses of $5,500 are theirs, that means they can deduct $3,625 from their taxes.
Deductible Medical Expenses
The full list of tax deductible medical expenses is available in IRS Publication 502, but we can break them down in a friendlier way below. Remember that the following categories include the costs of equipment, supplies, and diagnostic devices needed for the procedures.
Medical Payments and Some Insurance Premiums
Payments to medical and dental practitioners are generally deductible, as are insurance premiums for healthcare and long-term care insurance (provided they’re paid out of pocket by you and not your employer). The list of healthcare practitioners in the list includes doctors, dentists, surgeons, and psychologists.
Alternative Treatments
Additionally to treatments considered “regular”, the IRS includes other forms of treatment considered “alternative” in their list of deductible treatments, such as acupuncture, chiropractic, and even Christian Science practitioners, along with many others (provided they were ordered by the doctor).
Prescription Drugs, Medicines, And Other Medical Items
While included separately within Publication 502, the IRS essentially considers insulin, prescription drugs, eyeglasses and contacts, hearing aids, walking aids such as crutches and wheelchairs, service and therapeutic animals, dentures, and other medical-necessity items to be tax deductible.
Transportation For Medical Purposes
The cost of transportation to and from medical facilities and wherever caretakers are located, such as fuel and drivers, are deductible. On top of that, you might be surprised to learn that admission and transportation to medical conferences related to a disease that either you or your spouse (and even your dependents) have; unfortunately, meals and accommodation during the trip are not included.
Non-Cosmetic Surgeries
We are including this category because, although surgeries themselves are covered in a couple of other ones in this very list, other surgeries often considered cosmetic (but aren’t) are also tax deductible, including medically necessary reconstructive surgery (such as breasts or face), laser eye surgery, some instances of scar tissue removal, etc.
Reproductive Care
Aside from the basics such as pregnancy tests and birth control, other items such as breast pumps are included, as are procedures such as vasectomies and in vitro fertilization. Surrogacy-related costs are not tax deductible, however.
Health Programs
This category is for health-related programs and services that help people with things like addiction (from smoking and drinking to “hard” drugs), and even weight-loss programs backed by a physician’s orders.
Hospital, Nursing Home, and Nursing Services
If you pay out-of-pocket for nursing or hospital care for either yourself, your spouse, or any of your dependents, you can deduct the cost from your taxes. Meals you get at hospitals or similar institutions are also deductible.
Non-Deductible Medical Expenses
- Funeral or burial expenses.
- Nonprescription (AKA over-the-counter) medicines.
- Controlled substances:
- Toiletries and cosmetics (and toothpaste, sadly).
- Non-prescription nicotine weaning products such as gum and patches.
- Most cosmetic surgeries and treatments.
- Programs or trips for the general improvement of health, such as health and food clubs, and sadly the gym (don’t worry, there’s always next year).
When Are Medical Expenses Worth Claiming?
Pros Of Claiming Medical Expense Deductions
Higher Savings For Taxpayers With Higher Medical Bills
Nobody really wants to have such substantial out-of-pocket medical expenses ever, but if you find yourself in that situation, you have the small comfort of knowing that these expenses can lower your taxable income when filing your return. Just make sure that these expenses exceed 7.5% of your AGI, but they probably will if your medical needs are extensive.
Offset Emergency Medical Expenses
Medical emergencies can really do a number on a family’s budget for the year, with the potential to be financially devastating if they make a person needing medical care for an extended period of time. Being able to deduct these expenses from your taxes can ease the financial burden on what is already a difficult time for everyone involved.
A Legal Way To Reduce Your Taxable Income
By reading this guide you already know how comprehensive the list of deductible expenses is, so that means lowering more of your taxable income when filing your return. On top of that, remember that itemizing your deductions doesn’t apply to medical expenses in a vacuum; all other deductible expenses from the rest of the categories that apply, like charitable donations and mortgage interest, must be included in your Schedule A form, so the savings will inevitably pile up.
Cons Of Claiming Medical Expense Deductions
The AGI Threshold To Qualify Can Be High For Some
The most obvious hurdle to overcome when it comes to deductible medical costs is going above the 7.5% of your AGI. This might negatively impact taxpayers that have moderate medical expenses that don’t account for more than 7.5% of their AGI despite not being big earners, preventing them from taking the deduction. For low-income taxpayers, even if their expenses do go over the AGI threshold, the savings might be so low that they won’t be worth the effort of itemizing.
Time-Consuming Filing Requirements And Record-Keeping
To claim eligible expenses requires very detailed record-keeping, along with a deeper understanding of which expenses are deductible and which ones aren’t. For many taxpayers, this means getting professional assistance, which increases costs. Also, if your documentation is any less than perfect, the deductions you are trying to claim might be disallowed if you are audited.
Higher-Than-Average Risk Of Being Audited
Medical expenses are some of the scrutinized deductions by the IRS, and a higher amount of them means more attention paid to your return. Such scrutiny can increase your chances of an audit, which is always stressful and time-consuming even if you have nothing to hide unless your records are 100% impeccable by IRS standards.
How To Claim Deductions On Medical Expenses
Itemize Your Tax Reduction
The first step is to itemize your taxes instead of taking the standard reduction. Remember to check what the standard reduction is for the year when you’re thinking of doing this; for reference, the standard reduction for 2024 goes from $14,600 to $29,200 depending on your filing status. Think about which option will save you the most money, because itemizing takes more time and consideration than the standard reduction.
Use Schedule A To Calculate Your Deduction
Schedule A, “Itemized Deductions”, is the IRS form that you need to fill in order to itemize deductions on your tax return. It has to be attached to your Form 1040. The form itself is divided into seven sections, but the relevant one for us right now is the “medical and dental expenses” section. In it, you will find a set of subsections where you will have to add up the different types of medical expenses you paid for during the year, as long as they qualify for tax deductions (consult our list above for specifics). Once that is done and you have completed the rest of the sections on Schedule A (and they all have to be filled out, which is what makes itemized deductions so time consuming), you’re ready to enter the information on your Form 1040.
Keep Strict Records Of All Medical Expenses
Through the year, you’ll want to collect and categorize every single bill and receipt you get from your medical expenses, such as doctor and pharmacy bills, receipts from care providers, medical items, and everything else. This is a bit of a catch-22 since the more medical expenses you or your spouse have, the harder it might be to keep such excellent records on each expense, so try and get help for this only from people you fully trust.
Tips For Maximizing Medical Deductions
When it comes to itemizing your medical expenses in your tax return, thoroughness is the name of the game. Remember that, when deducting any sort of expenses, it’s not about what you spent but what you can prove you spent. So, here are a few tips on how to get the most thorough, extensive list of records you can use at the end of the year.
Pharmacy Expenses
Some pharmacies can give you a full list of what you paid for during the year and if you paid for it out of pocket, which might be a fantastic way to back up your individual receipts.
Bank Account And Credit Card Statements
If you had a lot of medical expenses this year, producing your account and credit (or debit) card statements might go a long way in proving to the IRS that you actually paid for all of them out of your own pocket.
Your Doctor’s Office
Your doctor or dentist’s office should be able to provide you with a document that lists all of your year’s expenses with them. This is a useful method even if you paid in cash to get reimbursed by insurance because you can use the statement to claim any portion of the bill that wasn’t covered.
Start Organizing Your Medical Expense Records Early
No one really plans to be sick or have a chronic condition, so you will save yourself time and a lot of stress if you start collecting and organizing your medical expenses as soon as you have them. Whether you file your taxes digitally or create a paper system, this will allow you to more quickly calculate if they’re going to end up being more than the mandatory 7.5% of your AGI. If, as the year draws to a close, you start to realize that you won’t save any money from deducting your medical expenses, you can take that into account to decide early if you will itemize your deductions or take the standard reduction.
Tax Deductible Medical Expenses: FAQ
1. What are medical expense deductions?
Medical expenses are a type of deductions that allow you to legally reduce your taxable income, provided that you paid for them out-of-pocket. The IRS holds a list of eligible medical and dental expenses that you can report on your tax return when you itemize your deductions instead of taking the standard deduction for the year. If these expenses exceed 7.5% of your AGI, any amount over that limit can be deducted from your taxes.
2. Can I claim medical expenses for my family?
Yes, the IRS allows you to claim medical costs for yourself, your spouse, and your dependents (such as qualifying children or relatives).
3. Can I still claim expenses if they were partially reimbursed through insurance??
Yes, but only the portion that you paid out-of-pocket is allowed to be claimed. The part that was paid by your insurance or a third party can’t be claimed on your return; if the total cost of a medical bill was paid by insurance, you simply cannot claim any part of it.
4. What documents do I need to claim these deductions?
You have to be pretty careful when collecting and archiving all your medical expense records. These will help you immensely should the IRS audit you, as medical deductions are strictly scrutinized. These records include:
- Receipts and invoices that clearly state the amount you paid.
- Documents recording the dates when the healthcare service was provided and the names of who provided them.
- All proof of payment, such as bank account and credit card statements.
- Records of mileage, gas tickets, and all costs related to medically-necessary transport.
5. How is the deduction for medical costs calculated?
Calculating your total deductions from medical costs is actually quite simple, just follow these steps:
- Locate your Adjusted Gross Income (AGI).
- Calculate what 7.5% of your AGI is.
- Add up every single deductible medical expense for the current tax year.
- If your total medical expenses are more than the 7.5% from your AGI, then they qualify as deductible.
- Finally, subtract the 7.5% threshold from your total medical expenses, the resulting number is what you can deduct from your taxes.
Remember that only the portion that goes above that 7.5% from your AGI is what you can deduct from your taxes; you can’t deduct your total medical expenses just because they exceed the 7.5% from your AGI.
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