Tax season is here, and it's time to get your paperwork in order. If you itemize deductions and spent a large portion of last year’s budget on medical care, you may qualify for a deduction on unreimbursed medical expenses.
How much do you have to spend before it's deductible?
You can deduct medical expenses that exceed 10 percent of your adjusted gross income (AGI). For example, if your AGI is $60,000 and you had $7,000 in qualifying medical expenses, you could deduct $1,000 (the amount over $6,000).
Tax-free reimbursements that qualify
- Flexible Spending Account (FSA), a pre-tax account set up through your employer and used to pay medical expenses insurance doesn't cover.
- Health Savings Account (HSA), a pre-tax account used to pay for medical expenses not covered by insurance; learn more about related plans and accounts at High-Deductible Health Plans (HDHPs), HSAs, and Insurance Costs.
- Health Reimbursement Account (HRA), money your employer reimburses you for medical expenses.
Other qualifying expenses include costs related to finding a diagnosis, cure, treatment, mitigation, or prevention of disease, and treatment that affects a body part or function. For a more complete picture of options and limits, you may also review information on related insurance stop-loss and expense protections at Medical Expense Stop-Loss Insurance.
Examples of deductible medical expenses
- Medical services, including appointments with physicians, dentists, psychiatrists, optometrists, surgeons and other medical professionals.
- Medications, prescription eyeglasses, contact lenses, dentures, hearing aids and other necessary health aids prescribed by a medical professional.
- Health, dental, vision and long-term care insurance premiums (subject to limits).
- Long-term care costs when eligible under tax rules.
- Transportation and lodging costs associated with travel to a health care facility.
- Mileage when you drive for medical care (use the IRS mileage allowance for medical travel that applies for the year you file).
What medical expenses are not deductible
You cannot deduct expenses covered by insurance, nor can you deduct certain over-the-counter treatments, first aid supplies, vitamins and nutritional supplements that are not prescribed by a medical professional.
Controlled substances that are not allowed under federal law are also not deductible even if prescribed under state law.
What paperwork do you need?
Keep receipts, billing statements, Explanation of Benefits (EOB) forms, and any records that verify the amounts you paid for medical care. Accurate documentation is required to support the deduction if you are audited.
When preparing your tax return, consider the medical deduction if it applies to you. If you are unsure how to maximize medical savings or plan for next year, ask your tax professional or Human Resources representative for guidance.
Frequently Asked Questions
Can I deduct premiums I pay through my employer?
Generally, premiums for health, dental, and vision insurance may be deductible as medical expenses when you itemize, subject to the AGI threshold and other limits.
Are over-the-counter medications deductible?
Over-the-counter treatments and vitamins are usually not deductible unless prescribed by a medical professional for a specific medical condition.
How do I calculate the AGI threshold?
Calculate 10 percent of your adjusted gross income, then total your qualifying medical expenses and subtract that threshold to determine the deductible amount.
Do I need to keep mileage records for medical travel?
Yes. If you claim medical-related mileage, keep a mileage log showing dates, miles driven, and the purpose of each trip to substantiate the deduction.