Tax season is here, and it’s time to start thinking about getting your tax paperwork in order. If you itemize your deductions and spent a large portion of your 2015 budget on medical-related expenses, you might get a tax break. Learn more about the guidelines for this deduction as you decide whether or not to take the deduction.
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). As an example, your AGI is $60,000 and your medical expenses are $7,000. Ten percent of your AGI is $6,000, and you can deduct $1,000.
What Medical Expenses can you Deduct?
A variety of medical expenses qualify for the tax deduction. You can deduct tax-free reimbursements you receive from your:
- 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 set up through your employer’s group plan or on your own and used to pay for medical expenses not covered by insurance.
- 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 a disease. You can also deduct expenses related to treatment that affects a body part or function. See the complete list of deductible medical expenses at IRS.gov. Here’s a short list.
- Medical services, including appointments to see physicians, dentists, psychiatrists, optometrists, surgeons and other medical professionals
- Medications, eye glasses, contacts, false teeth, hearing aids and other necessary heath aides a medical professional prescribes
- Health, dental, vision and long-term insurance premiums
- Long-term care
- Transportation and lodging costs associated with travel to a health care facility
- Mileage when you drive for medical care at a rate of 16.5 cents per mile (for 2010).
What Medical Expenses are not Deductible?
You cannot deduct anything insurance covers or certain medical items, including over-the-counter treatments, first aid supplies, vitamins and nutritional supplements that are not prescribed by a medical professional. Controlled substances, such as marijuana, are also not deductible even if it’s prescribed.
What Paperwork do you Need?
While you might have enough medical expenses to qualify for a tax deduction, be sure to show proof. Save receipts and other forms that verify how much you spent on medical care.
When you do your taxes this year, consider the medical deduction. Even if you don’t qualify this year, talk with your tax professional and Human Resources department about ways you can maximize your medical savings for next year.
