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Rules for Claiming the Medical Expense Tax Deduction

Medical expenses are deductible only to the extent the total exceeds 7.5% of your adjusted gross income (AGI). For example, if you itemize, your AGI is $100,000 and your total medical expenses are $9,000, you can deduct only $1,500 of medical expenses on Schedule A ($9,000 – $7,500). Recent tax law changes have influenced medical expense deductions. The Consolidated Appropriations Act of 2021 extended the 7.5% AGI threshold through 2025, allowing more taxpayers to qualify.

How to File a Tax Extension With Ramsey SmartTax

The amount of the reduction in your tax depends on what tax bracket your income is in. Standard Deduction – The standard deduction is a set amount that taxpayers can subtract from their income without the need to itemize deductions. The standard deduction is determined by factors such as filing status and is adjusted annually. Bank and credit card statements can serve as supplementary proof but should be paired with itemized bills to confirm medical necessity.

Primarily, these deductions are available to those who itemize their tax returns. For example, let’s say you have a family of four (yourself, your spouse, and two dependents) filing jointly with an AGI of $150,000 last year. The combined cost of your dental work, surgery, and medical equipment all took a toll, and together you spent over $40,000 on deductible medical expenses. In this case, your medical deduction of $25,000 (which is $40,000 minus 10% of your AGI, or $15,000) would exceed your standard deduction of no more than $24,400. The IRS allows federal filers to deduct qualifying medical expenses that exceed 7.5% of their adjusted gross income (AGI).

Long-term Care Services

Though the deduction seems simple, there are a variety of rules about taking the deduction that you should know before filing your taxes. The good news is that the IRS allows U.S. taxpayers, including expats, to deduct unreimbursed medical and dental expenses that exceed 7.5% of their adjusted gross income (AGI). So, if you’ve had significant health-related expenditures, it’s worthwhile to explore this deduction. Accurate documentation of medical costs is essential for claiming deductions.

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• And if you want to file your own taxes, TurboTax will guide you step by step so you can feel confident they’ll be done right.
• Thorough records are necessary when claiming medical expense deductions.
• Understanding how to navigate these provisions can be particularly challenging.
• This involves subtracting the AGI threshold from your total medical expenses.

Maintaining a separate record of reimbursed amounts ensures that only qualifying expenses are claimed. Even with insurance, many individuals face out-of-pocket costs from deductibles, copayments, and uncovered services. For example, if a procedure costs $10,000 with 20% coinsurance, the patient owes $2,000. These amounts qualify as deductible medical expenses if not reimbursed. By taking the time to understand and accurately claim your medical expense deductions, you can reduce your taxable income and potentially increase your refund, putting more money back in your pocket.

Are Medical Expenses Tax Deductible?

Unlike FSAs, HSA funds roll over year to year, offering greater flexibility. You can’t claim the standard deduction and itemize, too—it’s one or the other. SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Seek expert advice if unsure about the specifics of your situation.

What Is a Medical Expense Deduction?

John and Maria are a married couple filing jointly, with a combined AGI of $100,000. They had a tough year medically – unreimbursed medical and dental bills came to $40,000 (major surgeries and treatments). They also have other itemizable expenses like state/local taxes and charitable donations totaling about $5,000. Your AGI is essentially your total income minus certain adjustments (like retirement contributions or student loan interest).

• Taxpayers often look for ways to reduce their tax liability, and deducting medical expenses can provide significant savings, particularly given the increasing costs of healthcare.
• If you have more complex tax situations, or if you’re uncertain about the deductibility of certain expenses, it’s always a good idea to consult with a tax professional.
• Medical expenses can add up quickly, but the IRS allows taxpayers to deduct some costs if they meet certain criteria.
• These accounts allow taxpayers to set aside pre-tax dollars for medical expenses, reducing taxable income.

Only unreimbursed out-of-pocket medical expenses can be claimed as an itemized deduction. Reimbursement – Reimbursement refers to the repayment of expenses incurred by an individual. If an individual receives reimbursement for medical expenses from insurance or another source, only the unreimbursed portion of the expenses can be claimed as a deduction. Only out-of-pocket costs are deductible, so insurance reimbursements must be tracked. If an expense is later reimbursed by insurance or a health savings account (HSA), the deduction must be adjusted. Failing to account for reimbursements can lead to overstated deductions and potential penalties if audited.

But many taxpayers miss out on this valuable tax break because they don’t know which expenses are eligible or how to claim them. If you had substantial health care expenditures last year, you may be able to deduct some of them from your taxable income. But section 213 does something else—it sets out the expenses to be eligible to be paid or reimbursed under an HSA, FSA, Archer MSA, or HRA. You can benefit from those plans even if you don’t itemize, making them far more appealing.

Joy is an experienced CPA and tax attorney with an L.L.M. in Taxation from New York University School of Law. After many years working for big law and accounting firms, Joy saw the light and now puts her education, legal experience and in-depth knowledge of federal tax law to use writing for Kiplinger. She writes and edits The Kiplinger Tax Letter and contributes federal tax and retirement stories to kiplinger.com and Kiplinger’s Retirement Report. Her articles have been picked up by the Washington Post and other media outlets.

Your filing status and number of dependents don’t affect these deductions. To claim the medical expenses, however, you must itemize your return rather than take the standard deduction. The standard deduction for tax year 2024 is $14,600 for a single taxpayer.

Consulting with a local tax professional can provide clarity on state-specific regulations and ensure you’re not overlooking any potential deductions. Being informed about both federal and state tax laws is essential for optimizing your tax strategy. If your Can I Deduct Medical Expenses itemized deductions exceed the standard deduction, it makes sense to itemize.