When are Health Expenses a Tax Write Off?

All taxpayers are allowed an itemized deduction for medical expenses to provide care for themselves, their spouse and their dependents.  But before you write off every dental procedure, keep in mind there are some limits that can minimize the benefit from this tax write off.

First you notice I said itemized deduction, that means you will not get a deduction unless all your itemized deductions added together, things like mortgage interest, real estate taxes and charitable contributions, add up to more than the standard deduction.  Second the amount of medical expenses you get to add in to all those other itemized deductions is only the amount that your total medical expenses exceeds 7.5% of your adjusted gross income.  (That’s the bottom number on the first page of your 1040 tax return)  For those of you planning on getting sick in the future, you should know that beginning in 2013 that percentage jumps to 10% for most taxpayers.

So now you have done some estimating and think that root canal you had last year is going to put you over the limit for medical expenses, what are the items that count as deductible medical expense?  Generally it would include any amount paid for the diagnosis, cure, mitigation, treatment or prevention of disease or for the purpose of affecting any structure or function of the body.  Yes that is straight from the IRS, so here are some examples to help you understand what it means:

  • Amounts paid to doctors, dentists, clinics and hospitals because you are sick or injured – deductible
  • Amounts paid for insulin and other prescription medications – deductible
  • Amounts paid for medical care insurance – deductible (more on this for the self-employed later)
  • Amounts paid for transportation, travel and required lodging while receiving any of the above services – deductible
  • Amounts paid for your general well being such as health club memberships, massages or cosmetic surgeries – not deductible
  • Amounts paid for over the counter medications – not deductible
  • Amounts paid for insurance to cover disability, loss of income or loss of life – not deductible
  • Amounts reimbursed or paid for by insurance, health savings accounts or other parties – not deductible

If you are self-employed, the premiums you pay for healthcare insurance for you, yourself and your dependents is 100 percent deductible from income and from the amount of net profit used to calculate self-employment tax.

There are a few other unique rules about medical expense write offs and you probably want to consult a tax professional if you think any of these may apply to you.

  1. The definition of dependent is somewhat broader than just the people you claim as dependents on your tax return
  2. A portion of long-term care insurance is deductible and the amount varies based on your age
  3. Although tax deductions are usually a write off in the year they are paid, pre-payments for future medical procedures are only deductible in the year the procedure is actually performed
  4. Although cosmetic procedures are generally not deductible, some elective procedures may still be written off as medical expenses
  5. Special schooling for a physically or mentally handicapped person, including inpatient treatments and the cost of service animals may be deductible
  6. The cost of home improvements may be deductible if they are primarily to facilitate medical care

No one wants to get sick, but if you do at least there is a chance you can get a tax write off for the cost of getting well.

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