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Medical expense deduction
Did you have major medical or dental bills this year? Recoup some of the costs with this deduction.
If you, your spouse or your kids have had expensive medical or dental bills this year, you could cut your tax bill with the medical expense deduction. Read on to see if you qualify and how much you could claim on your tax return.
What's in this guide?
- What is the medical expense deduction?
- How much is the medical expense deduction worth in 2019?
- Who qualifies for the medical expense deduction?
- How to calculate the medical expense deduction
- What to watch out for
- Compare tax filing services
- Related tax credits or deductions
- Bottom line
- Frequently asked questions
What is the medical expense deduction?
The medical expense deduction is a federal tax deduction used to offset the costs of high medical bills. But you must itemize to claim it and your qualified medical expenses must exceed 7.5% of your adjusted gross income.
For example, let’s say your gross income is $80,000, but you contributed $19,000 to your 401(k), sent $12,000 in alimony to your ex-spouse and paid $2,000 in student loan interest. Your adjusted gross income (AGI) would be $47,000 and you could claim any unreimbursed medical expenses exceeding $3,525. So, if your medical expenses topped out at $8,000, you could deduct $4,475 from your taxes.
What qualifies as a medical expense?
The chart below outlines popular medical expenses you can and can’t deduct. Visit the IRS website for a complete list.
|Breast reconstruction surgery after mastectomy|
|Future medical care|
|Guide dog or service animal|
|Health club dues|
|Medical expenses paid in a different tax year|
|Medicines from other countries|
|Non-prescription drugs, excluding insulin|
|Personal use items like toothpaste and deodorant|
|Transportation costs for medical care|
|Vitamins and supplements|
|Wigs for patients who have lost their hair due to illness|
How much is the medical expense deduction worth in 2019?
You can deduct all unreimbursed medical expenses that exceed 7.5% of your adjusted gross income.
Why does my tax form say there’s 10% threshold for medical expenses?
A law passed in December 2019 that changed the medical expense deduction from 10% to 7.5% for tax years 2019 and 2020. If you used Form W-4 to calculate your medical expense deduction before December 31, 2019, the IRS recommends redownloading Form W-4 and using the new revision that lists the 7.5% amount.
The medical expense deduction has these limitations:
- Only expenses paid this year qualify. You can only claim expenses that you paid this year. So, if you had surgery in 2019 but paid the bill in 2020, you can’t write it off on your 2019 tax return.
- Reimbursed expenses don’t count. If your insurance company reimburses you for an expense, you can’t claim it on your return.
- State deductions vary. Even if you don’t qualify for the federal deduction, you may qualify on the state level if it has a lower AGI threshold. Before you file your return, check to see what state medical expense deductions may be available to you.
How much was the medical expense deduction worth in previous years?
In 2018 and 2017, you could deduct all unreimbursed medical expenses that exceeded 7.5% of your AGI. In 2016, the threshold was 10% for most taxpayers or 7.5% for anyone over age 65.
Who qualifies for the medical expense deduction?
As long as your medical expenses exceed 7.5% of your AGI, you can claim this deduction.
How to calculate the medical expense deduction
Follow these four steps to calculate your medical expense deduction or to see if you qualify:
- Add up your total out-of-pocket medical expenses for the year.
- Calculate your AGI by subtracting 401(k) or IRA contributions and itemized deductions from your gross income.
- Multiply your AGI by 7.5% to determine how much of your medical expenses don’t qualify.
- Subtract the number in Step 3 from your total out-of-pocket expenses. This amount is how much your medical expense deduction is worth for this year. If 7.5% of your adjusted gross income is less than your total medical expenses, then you don’t qualify for the deduction.
For example, if your AGI is $40,000, then any medical expense over the $3,000 limit qualifies for the medical expense deduction. So, if your out-of-pocket medical expenses were $5,000, you could write off $2,000. But if your medical expenses were $3,000 or less, you wouldn’t qualify.
What to watch out for
The medical expense deduction has these potential drawbacks:
- You must keep detailed records. You’ll need to keep detailed records of any out-of-pocket medical expenses you paid this year. That could include receipts, medical bill statements, checks and more.
- It may not make sense to itemize. Simply because you qualify for the medical expense deduction doesn’t mean you should take it. If the total amount of your itemized deductions is less than your standard deduction, you’ll save more money by taking the standard deduction.
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Related tax credits or deductions
Taxpayers who qualify for the medical expense deduction may also qualify for the:
- Child and dependent care tax credit. If you paid for dependent care for a child, an incapacitated spouse or adult dependent, you could qualify for this credit worth up to $700.
If you or your family have racked up major medical or dental bills this year, you could offset some of the costs with the medical expense deduction. But your unreimbursed expenses must exceed 7.5% of your AGI to qualify, and you’ll have to itemize your taxes.
If you’re unsure about which medical expenses qualify, consider hiring a tax professional or using a top-rated online service that can help you figure it out. These services also calculate whether you’ll save more money by going with the standard or itemized deduction.
Frequently asked questions
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