Understanding Tax Deductible Medical Expenses: A Comprehensive Guide

If you’ve paid out of pocket for medical, dental, or other health-related expenses this year, you know how quickly these costs can add up. Fortunately, the IRS offers some relief: many unreimbursed medical expenses are tax deductible when they exceed 7.5% of your adjusted gross income (AGI). This includes a wide range of expenses such as hospital stays, dental bills, travel expenses, insurance premiums, and more.

In this blog, we’ll explore the ins and outs of medical expense deductions, helping you understand what qualifies, what doesn’t, and how to claim these deductions on your tax return. And remember, for any mortgage service needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with one of our expert loan officers.

What Medical Expenses Are Tax Deductible?

First and foremost, it’s important to note that medical expenses are only tax deductible when you itemize deductions on your tax return. If you take the standard deduction, you won’t be able to deduct medical expenses separately.

According to IRS Publication 502, some of the more common deductible medical expenses include:

• Fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
• Inpatient hospital care
• Residential nursing home care when medical care is the reason for the stay
• Acupuncture treatments
• Inpatient treatment for drug or alcohol addiction
• Smoking-cessation programs and prescription drugs for nicotine withdrawal
• Weight-loss programs for specific diseases, including obesity, diagnosed by a physician
• Health club memberships if they’re part of obesity treatment
• Prescription drugs and medicines, including insulin
• Admission and travel costs for attending a medical conference related to a condition you, your spouse, or dependent child have
• Medical aids including false teeth, reading or prescription eyeglasses, contact lenses, or hearing aids
• A guide dog or other service animal to assist a visually impaired, hearing disabled, or physically disabled person
• Crutches and wheelchairs
• Transportation costs for receiving qualifying medical care
• Insurance premiums for medical care and limited amounts for long-term care

What Medical Expenses Are Not Tax Deductible?

Not all health-related expenses are tax deductible. Some of the non-deductible expenses include:

• Insurance premiums paid through an employer-sponsored health plan
• Funeral or burial expenses
• Nonprescription medicines, toiletries, toothpaste, or cosmetics
• Trips taken with the general goal of improving health
• Cosmetic surgery
• Nonprescription nicotine patches or gum

Additionally, medical expenses that were paid for (or partially paid for) through insurance or a health savings account (HSA), flexible spending account (FSA), Archer medical savings account (MSA), or health reimbursement arrangement (HRA) are not deductible.

If you’re self-employed and claim the self-employment health insurance deduction, you can’t also deduct these premium expenses as medical expenses. However, you may be able to deduct a portion of your premiums if they weren’t included in the self-employment health insurance deduction.

What Percentage of Medical Expenses Are Tax Deductible?

All of your qualifying medical expenses are tax deductible, but your deduction is limited based on a percentage of your AGI. Here’s how it works: qualifying medical expenses that are less than 7.5% of your AGI are not deductible; eligible medical expenses that exceed 7.5% of your AGI are.

For example, if your AGI is $80,000, the first $6,000 (7.5% of $80,000) of your qualifying medical expenses are not deductible. However, if your total qualifying medical expenses for the year are $10,000 and you itemize deductions on your tax return, you can deduct the remaining $4,000. If you’re in the 24% tax bracket, a $4,000 deduction saves you roughly $960 in taxes.

How to Deduct Medical Expenses

To claim a deduction for medical expenses on your federal tax return, you’ll need Schedule A (Form 1040). You’ll also need receipts and records for your qualifying expenses, which include expenses you paid for yourself, your spouse, dependents, and your children who are claimed as dependents on another person’s tax return.

When you have your information in one place, follow these steps to claim your deduction:

1. Total up your qualified medical expenses and premiums for the year. Keep receipts and payment records with your tax files.
2. Include any out-of-pocket medical insurance premiums you’ve paid. If you claimed the self-employment health insurance deduction on Schedule 1 (Form 1040), do not include the amount on line 17 in your medical deduction.
3. Subtract (or exclude) any reimbursements paid to you. Don’t include payments you’ve made from an HSA, FSA, or Archer MSA.
4. Report your total medical expenses on line one of Schedule A. For more details on completing the form, see Instructions for Schedule A.
5. You may also want to claim any other itemized deductions available to you. These include (but aren’t limited to) deductions for home mortgage interest, state and local taxes, capital losses, and charity donations.

Frequently Asked Questions

Whose Medical Expenses Can I Deduct?

You can deduct medical expenses you paid for yourself, your spouse, dependents, and your children who are claimed as dependents on another person’s tax return.

Are Medical Expenses Paid With an HSA Tax Deductible?

No, medical expenses paid with an HSA, FSA, Archer MSA, or HRA are not tax deductible.

When Can I Claim Medical Expenses on My Taxes?

You can claim medical expenses on your taxes for the year in which you paid them. Be sure to keep all receipts and records to support your deduction.

The Bottom Line

Though not everyone with medical expenses will qualify, deducting medical, dental, and other health-related expenses can help reduce your federal tax bill if you do. If you think you may have enough eligible medical expenses to claim the deduction this year (or any year), make sure to track your expenses and save receipts throughout the year so you’ll be ready to go at tax time.

For any mortgage service needs, O1ne Mortgage is here to assist you. Call us at 213-732-3074 to speak with one of our expert loan officers. We are committed to providing you with the best service and helping you achieve your financial goals.