If you have had any medical expenses this year, there may be some relief for you! A deduction exists for medical expenses, and it is often one that taxpayers forget about. Although you will need to itemize on Schedule A to take advantage of this deduction, medical expenses exceeding 7.5% of your AGI (adjusted gross income) are deductible.
What is considered a medical expense?
Medical expenses are any cost incurred in the prevention or treatment of injury, or disease. Health and dental insurance premiums, doctor and hospital visits, co-pays, prescription and over the counter drugs are all examples of these expenses. Medical expenses also include the premiums you pay for insurance that covers the expenses of medical care, as well as the amounts you pay for transportation to get medical care. Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness.
Other examples include:
- Payments to doctors, dentists, surgeons, chiropractors, and other nontraditional medical professionals.
- Payments for in-patient hospital care or residential nursing home care.
- Payments for weight-loss programs, smoking cessation programs, acupuncture treatments for addiction, or prescription medication.
- Payments for prescription eyeglasses, contact lenses, hearing aids, wheelchairs, guide dogs, or other items purchased to aid physical disabilities.
- Payments for transportation to medical care facilities including standard mileage rate calculations.
Keep in mind, transportation costs for medical appointments, such as mileage ($0.21 per mile for 2024 and $0.21 per mile for 2025), parking, tolls, and lodging are deductible if they exceed the 7.5% threshold. Keep in mind that you can only deduct up to $50 per person per night of lodging (you can include lodging for a person traveling with you).
What expenses are you allowed to deduct?
Out-of-pocket medical expenses are allowed to be deducted. These are expenses that are not covered by insurance, and are paid by you, from your own money. You also cannot take a deduction if you have received a reimbursement of any kind, from any source. Always check with your insurance company before going ahead with a procedure. Out-of-pocket medical expenses can include copays, deductibles, coinsurance, and anything else not covered. Other services can be included, like glasses, crutches and wheelchairs if insurance does not cover them.
If you have a dependent, you can include medical expenses paid on their behalf. In order for these expenses to be included, the person must have been your dependent at the time services were provided, or at the time you paid for the expenses.
There are a few types of expenses that are not permitted to be deducted however. Funeral and burial expenses, nonprescription expenses, toothpaste, toiletries, cosmetics and most cosmetic surgeries do not qualify.
How much are you allowed to deduct?
When it comes to how much money you can actually deduct, once you calculate your AGI, (there are instructions on Form 1040), find 7.5% of that number. You would be able to take advantage of this deduction if your expenses exceed 7.5% of your AGI. Anything less than that cannot be deducted. So, for example, if your AGI is $100,000, you can only deduct the portion of your medical expenses over $7,500.
Reach out to us: Navigating which medical expenses may be used for a deduction can be tricky. Our CPAs can help you sort through it, and help you find out exactly how much you may be able to deduct. Call today at 855-542-7537.
