The amount paid out toward medical expenses can really put a dent in the wallet of an individual, especially in cases where the health issue was not anticipated. In view of this, the IRS has a provision for deduction on certain unreimbursed medical and dental expenses, which may reduce one’s taxable income.
Medical expenses deductions – Who qualifies
Taxpayers are required to itemize deductions on Schedule A (Form 1040) in order to claim the medical expenses deduction. Thus, they cannot take the standard deduction and will need to itemize all their allowable expenses. Keep in mind that only unreimbursed medical and dental expenses exceeding 7.5 percent of your adjusted gross income are deductible. As the IRS says, “You can deduct only the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income.”
Calculating the deduction
To figure out how much is deductible:
- Calculate 7.5% of Your AGI: Multiply your AGI by 0.075.
- Subtract This Amount from Total Unreimbursed Medical Expenses: The result is the amount that is deductible.
Example: With an AGI of $60,000 and unreimbursed medical expenses of $8,000:
7.5% of AGI: $60,000 × 0.075 = $4,500
Deductible Amount: $8,000 – $4,500 = $3,500
In this case, $3,500 can be deducted as a medical expense.
Qualifying medical expenses
For the IRS, medical expenses are the amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of diseases, or for the purpose of affecting any structure or function of the body.
Expenses that may qualify as deductions include:
- Payments to doctors, surgeons, dentists, chiropractors, psychiatrists, psychologists, and other medical professionals.
- Prescription drugs and insulin.
- Medical equipment, supplies, and diagnostic devices.
- Dental treatments, including false teeth.
- Eye care, including eyeglasses and contact lenses.
- Hearing aids.
- Transportation expenses primarily for the purpose of receiving medical care, including mileage, bus fare, and parking fees.
It is worth noting that nondescription drugs, except insulin, general health items including toothpaste, health club dues, vitamins, diet food, and nondescription nicotine products are not usually deductible.
Recent updates and considerations
Medical Expense Deduction Threshold and Qualifying Expenses as of December 2024
- No threshold and qualifying expenses have been changed for the medical expense deduction. The threshold remains at 7.5% of AGI. Heeded by the taxpayer should be legislation changes that may change these and other deductions in future tax years.
- Standard Deduction vs. Itemizing
For tax year 2024, standard deductions are as follows:
Single Filers: $16,600
Married Filing Jointly: $29,200
Taxpayers should calculate their potential itemized deductions using medical expenses and compare those against the standard deduction to see which yields a greater benefit from taxes. If itemized deductions are not greater than the standard deduction, there is no significant benefit in itemizing the deductions.
How to claim the medical expenses deduction
To claim the deduction:
- Itemize Deductions: Use Schedule A (Form 1040) to list itemized deductions.
- Report Total Medical Expenses: Put the total unreimbursed medical expenses on line 1 of Schedule A.
- Calculate 7.5% of AGI: Put this amount on line 2.
- Subtract Line 2 from Line 1: Put the result on line 3; this is your allowable medical expense deduction.
- Have appropriate documentation for all the expenses claimed, including receipts and invoices. This is always a good idea in case the IRS audits you.
Other considerations
- Health Savings Accounts and Flexible Spending Accounts: Expenses paid with money from either of these accounts cannot be deducted because those accounts already have tax advantages.
- Reimbursements: Only unreimbursed expenses are deductible. If an expense is reimbursed by insurance or an employer, it cannot be deducted.
- Timing: For purposes of determining deductibility, use the date paid for the expense, not the date the service was performed. Only expenses paid during the tax year are deductible.
