Can I Deduct Medical Expenses?

December 13, 2022 by Steve Banner, EA, MBA
Piggy bank and stethoscope on blue background

As much as we may hope that our medical expenses are few and far between, the reality for everyone but Clark Kent and all other invulnerable superheroes out there, is that medical expenses are a fact of life. But at the same time, it is also a fact that medical expenses can be deductible on your tax return. However, the actual amount of expenses that you can deduct depends on three things:

 

  1. How much did you spend on qualified medical expenses during the year?
  2. How much did you earn for the year?
  3. Are you eligible to include Schedule A, Itemized Deductions on your tax return?

Let’s look at these items one at a time.
 

1. Qualified Medical Expenses

The definition of medical expenses that are qualified to be deducted is quite broad. Any and all unreimbursed expenses you paid out of your own pocket for the diagnosis, treatment, or cure of conditions that affect any part of the body, or any function of the body are eligible for deduction. This includes payments for legal medical services provided by physicians, surgeons, dentists, and other medical practitioners, as well as any related equipment and supplies. These expenses must be related to a genuine medical need. Some optional procedures, such as elective cosmetic surgery that is not connected to an injury or disease, are not deductible. In other words, for medical care expenses to be deductible, they must have been paid primarily to alleviate or prevent a physical or mental disability or illness. For example, a person who loses all of their hair due to medical reasons may be able to deduct the cost of a wig. This is especially true if the wig helps the person overcome the mental anguish that comes with hair loss. Expenses that are merely beneficial to general health, such as vitamins or a vacation, are generally not deductible. However, if a doctor recommends or writes a prescription for vitamins to treat a particular ailment, the cost may be deductible based on the facts and circumstances.

It's important to note that not only are the expenses you paid for your own medical care deductible, but any expenses you paid on behalf of your spouse or dependents can also be included. Keep in mind that medical expenses that are paid by your medical insurance (including Medicare) and medical expenses paid through a Health Reimbursement Arrangement (HRA), Health Savings Account (HSA), Medical Savings Account (MSA), or through a Flexible Savings Account (FSA) are generally not deductible. Medical and dental insurance premiums paid with pre-tax dollars are not deductible. However, any medical or dental insurance premiums paid with after-tax dollars are deductible as a qualified medical expense. (Pre-tax dollars represent income from an employee’s paycheck that has not been subject to federal, state, social security, and Medicare taxes. Likewise, post-tax dollars are wages that have been subject to federal, state, social security, and Medicare taxes.)
 

2. Adjusted gross income (AGI)

Your income is a key factor in determining what portion of qualified medical expenses are eligible for deduction. This is because you may only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income (AGI). Your AGI appears on the first page of Form 1040 (on line 11 for 2021, but this may change in later years) and is calculated by adding up your income from all sources and then reducing it by the amounts you paid during the year for certain other expenses, such as IRA contributions.

For example, if the total amount you spent on qualified medical expenses last year was $10,000 and your AGI was $100,000, we can calculate your eligible medical expenses deduction as follows:

Threshold for deduction: $100,000 x 7.5% = $7,500
Eligible deduction: $10,000 - $7,500 = $2,500

But there is still more work to do. Although we have calculated that your available deduction for medical expenses in this example is $2,500, we still have one more test to pass before claiming the deduction.
 

3. Schedule A, Itemized Deductions

The medical expenses deduction can only be claimed by attaching a completed form Schedule A to your Form 1040 tax return. This means that if you do not meet the conditions to be able to file Schedule A, you will not be able to claim the medical expenses deduction on your federal tax return.

To be able to file Schedule A, you must first calculate the total of your expenses in the following categories:

 

  • Eligible medical and dental expenses ($2,500 in our example)
  • State, local, real estate, and personal property taxes you paid (subject to limitations)
  • Qualified home mortgage and investment interest you paid
  • Gifts to charity
  • Casualty and theft losses

You will be able to file Schedule A and claim your medical expenses deduction on your federal return if your filing status for 2022 is married filing joint and your total itemized deductions exceed $25,900 ($12,950 for those filing as single and taxpayers filing as married filing separate, and $19,400 for head of household). Due to the federal standard deduction rates, it is sometimes challenging for taxpayers to have enough deductions to make it over the standard deduction threshold. However, even though a taxpayer may not be able to claim itemized deductions on their federal return, they may be able to claim itemized deductions on the state return. Many states have a lower standard deduction rate, and this is why it is important to check the rules for your state to see if you qualify.

According to what we have just seen, medical expenses are deductible. But whether or not you will be able to claim this deduction in a given year depends entirely on the amounts you spent and the amounts you earned. Keeping good records of the total amounts you paid for medical and dental care for yourself, spouse, and dependents is, therefore, critical to determining if you can take the deduction.

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Steve Banner, EA, MBA
Tax Content Developer

 

Steve Banner began his career in the field of income tax in 1977 and has since gathered business experience in a variety of countries and cultures. In addition to the United States, he has lived and worked for extended periods in Australia, Saudi Arabia, Canada, and Sweden. Along the way he studied Adult Education and earned a Bachelor of Education, Master of Educational Administration, and MBA. He joined TaxAudit in 2016, where he is a Tax Content Developer.


 

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