Are Medical Expenses Tax Deductible?
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At a Glance
Having outstanding medical debt can be stressful, especially if it’s sent to collections. The good news is, you may be able to get a tax deduction on some of your medical expenses, which can help save you money.
In this article, read more about:
Can I claim medical expenses on my taxes?
When you’re filing your taxes in 2022, you’re able to deduct qualified, unreimbursed medical expenses that are more than 7.5% of your 2021 adjusted gross income (AGI).
DEFINITION BOX: Adjusted gross income (AGI) is your gross income minus certain adjustments made by the IRS and used as a basis for calculating your taxable income. Gross income can include wages, dividends, alimony, capital gains, business income, retirement distributions and others. Then, you’d subtract certain payments you’ve made throughout the year, such as student loan payments, deductible HSA contributions, self-employment taxes, and others.
So for example, if your AGI is $50,000, anything more than the first $3,750 of medical bills can be deducted. In this example, if you have $5,000 in medical bills, you can deduct up to $1,250. Or, if you have $10,000 in bills, you can deduct up to $6,250.
When adding deductions, you can only include the medical expenses you paid during the year for yourself, your spouse, or other dependents. Additionally, medical expenses must be considered medically necessary in order to qualify.
Qualified medical expenses deductions
The IRS Publication 502 has a full list of medical expenses that can be included as deductions, but in general, they define medical expenses as “primarily to alleviate or prevent a physical or mental disability or illness.” This is pretty broad so there are a number of qualifications, but here are some of the most common:
- Payments to doctors, dentists, surgeons, psychiatrists or psychologists, or other medical practitioners or providers
- Inpatient and outpatient medical bills
- Nursing home care
- Weight-loss programs (for doctor-diagnosed diseases, including obesity)
- Prescription drugs
- Medical equipment such as dentures, reading or prescription glasses, contacts, hearing aids, crutches, wheelchairs, canes, and service animals
- Costs for transportation to and from medical care
- Insurance premiums for medical care or long-term care insurance (if not paid by your employer)
- Home improvements made for purposes of accessibility
Medical expenses that cannot be deducted
There are some medical expenses that do not qualify and cannot be deducted. These include:
- Funeral expenses
- Over-the-counter medications
- Most cosmetic surgery
- Nicotine gum and patches that don’t require a prescription
You also cannot include expenses you were reimbursed for. This means if insurance, your employer, or a health savings account (HSA) paid some or all of the bill, you cannot deduct what was paid.
Claiming medical expenses on taxes
In order to claim the medical expense deduction, you should take the following steps:
- Keep records. Throughout the year, be sure to hold on to all bills and records from your pharmacy or providers. You should have documentation of each expense you’re claiming to ensure accuracy when filing, and also have records in case you must provide proof to the IRS.
- Itemize. Instead of taking the standard deduction, you’ll need to itemize. While this may take more time, it can help you save money if your standard deduction is less than your itemized deduction.
- Use Schedule A. Schedule A is an IRS tax form used to claim itemized deductions on your tax return. You should file a Schedule A and attach it to or file electronically with your Form 1040. This form is where you should list all itemized deductions you want to claim, including your medical expenses.
Even if you have enough medical expenses to include, there’s no guarantee you’ll be able to deduct them. This is because your total itemized deductions, which also include other taxes, mortgage interest, and other things, need to exceed the standard deduction. In 2021, the standard deduction was $12,550 for individuals and $25,100 for married couples filing jointly.
- File. Your tax software or accountant will help you follow the correct steps to file appropriately.
- On Schedule A, report the total medical expenses you paid during the year on line 1, and your AGI on line 2.
- Enter 7.5% of your AGI on line 3.
- Enter the difference between your expenses and 7.5% of your AGI on line 4.
The resulting amount on line 4 will be added to any other itemized deductions you file, and subtracted from your AGI to reduce your taxable income for the year.
Medical deduction mistakes to avoid
When filing a medical deduction, it’s important to have the proper documentation and follow all steps properly or work with a tax professional. This can help you avoid mistakes like:
- Missing qualifying deductions. There are dozens of medical deductions that qualify, and it can be easy to forget or overlook a few.
- Not knowing your state’s rules. You may not have enough expenses to claim a federal tax deduction, but there may be different rules at the state level. For example, your state may have a lower percentage of your AGI you may be able to claim.
- Not keeping good records. While you don’t need to submit documentation when filing, copies of all records and billing statements are important to make sure you’re claiming appropriately, and in the event you’re audited and need to provide proof you actually incurred the amount itemized. Plus, it makes it easier to calculate your deduction and file during tax time.
Commonly Asked Questions
Can you claim out-of-pocket medical expenses on your taxes?
Yes, in 2022 you’re able to deduct qualified, unreimbursed medical expenses that are more than 7.5% of your 2021 adjusted gross income (AGI). These expenses can be itemized and filed with a Schedule A form when filing your taxes. It’s recommended to work with a tax professional or follow tax filing software instructions carefully to ensure you capture all qualifying expenses and file appropriately.
What qualifies as a deductible medical expense?
Some out-of-pocket medical expenses are tax deductible and can be claimed on your taxes. Examples include payments or fees to medical providers, inpatient or outpatient hospital care costs, prescription drug costs, insurance premiums and more. You can only deduct medical expenses you paid during the year for yourself, your spouse, or qualifying dependents.
Are HSA contributions tax-deductible?
Yes, contributions to a health savings account (HSA) are tax-deductible, and the money grows tax-free. It can also be withdrawn tax-free for qualified medical expenses. Even if you’re unable to itemize federal deductions for medical expenses, you could see tax savings by contributing to an HSA. To open one, you must have a high-deductible health insurance plan.