How do I deduct medical expenses?

October 14, 2019 by Jean Lee Scherkey, EA
stethoscope on top of stack of cash over an Insurance Claims statement

With the cost of health care rising like heat from the engine of an ’80 Ford Pinto crossing the Mohave desert in summertime, taxpayers are looking for relief. One way to offset the rising costs of health care is by claiming an itemized deduction for qualified medical expenses paid during the year on your income tax return.

You need to overcome a couple of hurdles before you can deduct the medical expenses you paid during the year on Schedule A. The first hurdle is to find out if your itemized deductions are above your standard deduction, which for 2019 is $24,400 for a married filing joint return, $12,200 for single or married filing separately, and $18,350 for head of household. Other expenses that are included in itemized deductions are state and local taxes paid, mortgage interest and points paid up to limits on mortgage indebtedness, certain investment interest expenses, charitable contributions, casualty losses from a federally declared disaster, and gambling losses up to the amount of gambling winnings.

Once you decide that it is beneficial for you to itemize, the next hurdle is the medical expense deduction threshold. Only medical expenses that are more than 10% of the adjusted gross income listed on your return can be used as a deduction. Any medical expenses that were reimbursed through your medical insurance, paid with a medical flexible savings account or health savings account, or that your medical insurance directly paid to your medical provider, are not deductible to you. You may only deduct your actual out of pocket medical expenses. Let’s breakdown this hurdle into tiny steps. Adjusted gross income equals your total income minus certain expenses. On your 2018 federal Form 1040, the adjusted gross income amount is listed on line 7. To determine how much of your medical expenses paid will be able to be deducted, first multiply your adjusted gross income by 10%. Next, take this amount and subtract it from the total amount of medical expenses you paid during the year. This difference is the amount of medical expenses paid that can be deducted. Here’s an example.
 

While training for the big Spartan race, Paris took a tumble while trying to scale a wall, breaking his left foot and right elbow. Due to his fall and the cost of recovery, Paris paid $25,000 in medical expenses in 2018. His adjusted gross income on line 7 of his 2018 Form 1040 was $87,000. To calculate the amount of medical expenses that will be includable on Paris’s Schedule A, Paris must first multiply his adjusted gross income by 10%. $87,000 x 10% = $8,700. Next, Paris will need to subtract $8,700 from the total medical expenses he paid during 2018. $25,000 - $8,700 = $16,300. Paris may claim a $16,300 medical expense deduction on his 2018 Schedule A.
From coast to coast, taxpayers are feeling the burn the high cost of medical care is leaving on their wallets. For many who pay modest (though still burdensome) health care costs, there may be little to no tax relief on their federal income tax return for medical expenses paid due to the high standard deduction amounts and the 10% medical expense deduction threshold. However, for those who paid a heavy price for health care, a medical expense deduction may just be the cooling salve needed to get back on track financially.
 

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Jean Lee Scherkey, EA
Learning Content Developer

 

Jean Lee Scherkey began her career at TaxAudit in 2015, and her current title is Learning Content Developer. She became an Enrolled Agent in 2005. For several years, Jean owned a successful tax practice that specialized in individual, California and trust taxation, and assisting those impacted by tax identity theft. With over fifteen years of varied experience in the field of taxation, Jean has worked at different private tax firms as a Staff Practitioner, Tax Analyst, and Researcher. Before coming to TaxAudit, she worked over two years for TurboTax as an “Ask the Tax Expert.” In addition to her work in TaxAudit’s Learning and Development Department, Jean is actively involved in the company’s ENGAGE Volunteer Program, which provides opportunities for employees to help and serve the local community.  


 

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