If you're like most Americans, you've probably incurred a number of medical expenses during the year. What you might not know is that you can claim medical tax deductions for some of your medical costs when filing your federal tax returns. As with any deduction however, discuss these deductions with your tax specialist and become familiar with the IRS regulations governing these sorts of deductions.
How Medical Tax Deductions Work
As with all deductions, the Internal Revenue Service (IRS) has established rules and regulations governing when and how you can claim medical deductions. As a general rule, you can claim only unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income. For example, if your adjusted gross income is $60,000, you may claim only medical deductions that exceed $4,500, which is 7.5 percent of your gross income of $60,000.
In order to take full advantage of medical tax deductions, keep track of and include all medical expenses of everyone listed on your tax return, particularly your dependents. To claim medical tax deductions, make sure you maintain careful records and keep all medical receipts. You may be surprised at how much you spend each year on medical treatments and procedures, no matter how healthy you think you might be. Given the often crippling cost of medical treatment and procedures, it makes great fiscal sense to count as many medical costs as possible and receive the appropriate deductions.
Know What's Covered
The IRS has a fairly generous definition of medical expenses, but be careful and reasonable in what you claim. Dental treatment is included in the IRS's definition of medical expenses.
The IRS also allows you to claim medical tax deductions for medical costs that accrued for a dependent or spouse who may have died. Knowing how and what you may claim for medical tax deductions could amount to an enormous savings at a time when you might really need it. You may also be able to claim the cost of transportation for medical treatments or procedures based on certain cents per mile. You may also claim long-term care insurance depending on your age, uninsured treatments such as eye glasses and contacts or hearing aids and the costs associated with weight loss programs. You may also be able to claim nursing home stays, prescription costs, ambulance trips, chiropractors' fees, lab fees and substance abuse treatment and rehabilitation.
Besides actual medical costs, you might also be able to claim medical tax deductions for your health insurance premiums. However, if your employer pays for your health coverage by payroll deduction, it means he does so using pre-tax dollars. In that event, you've already received the tax benefit from payment of your premium, and you cannot claim deductions based for your insurance premium. If you're not certain whether you can claim deductions for your insurance premium, consult your benefits administrator.
Of particular interest are the IRS's regulations governing special needs. This includes special accommodations such wheelchairs, crutches and walkers, and any improvements that might need to be made in your home for those accommodations. If you need to build a ramp, widen doors or install handrails and lifts, you might be able to claim such home improvements as medical tax deductions. You might also be able to claim medical tax deductions for lowering your cabinets and sinks to accommodate a wheelchair, installing air filtrations systems, lowering light switches to accommodate wheelchairs and installing swimming pools or whirlpool baths.
To claim medical tax deductions for these sorts of home improvements, you're going to need a fairly precise statement from your doctor regarding why these improvements are necessary for your treatment or lifestyle. The improvements you make should coincide with your doctor's recommendation. If your doctor recommends a whirlpool for your condition, you don't install a swimming pool and attempt to claim it as a deduction.
Know the Limits
Your idea of acceptable medical deductions might not coincide with that of the IRS. The IRS will not entertain the idea of deductions for teeth whitening or hair transplants. If you're simply not certain whether you can claim a certain medical tax deduction, review Publication 502, Medical and Dental Expenses, for the IRS's definition of medical expenses allowable for medical tax deductions.
If you're going to itemize your tax deductions this year, you might want to include medical expenses, but how do you know which ones are qualified? The IRS imposes strict guidelines on claims for medical care, education, charitable donations and everything else under the sun.
Each year, especially around April 15th, millions of Americans begin to gather receipts and documents to support the various federal income tax deductions. Of the tax documents and deductions, claiming medical related expenses is often the most challenging for income tax filers.
There are many tax deductions and credits that are overlooked. New for this year only is the long distance tax credit. Other overlooked deductions include work supplies and expenses, child care costs, medical expenses, and more. The long distance tax credit is a one time only tax credit that is for this tax season only.