How to Claim a Medical Expense Tax Deduction

Claiming a medical expense tax deduction can help lower your tax bill by allowing you to deduct certain healthcare costs. If you have paid for medical treatments, prescriptions, or other health-related expenses for yourself, your spouse, or your dependents, you might qualify for this deduction. The IRS lets you deduct a portion of these expenses if you itemize deductions. In this guide, we will explain how to claim this deduction, what expenses are eligible, and how to maximize your benefits.

Medical Tax Deductions

Individuals with group health insurance coverage are most likely not able to deduct medical expenses. Only taxpayers who who itemize their deductions are eligible to claim any medical expenses via Schedule A. Furthermore, only those medical expenses that exceed 7.5% of the taxpayer's adjusted gross income (AGI) can be deducted.

You can deduct the amount of the total un-reimbursed allowable medical care expenses for the year that exceeds 7.5% of your Adjusted Gross Income or AGI. For example, let's say your AGI is $40,000 and your medical expenses are $5,000. As a result, you could claim $2,000 on your tax return: $40,000 AGI * 7.5% = $3,000. As a result, $2,000 exceeds your $3,000 limit of your $5,000 medical expenses. You can deduct medical expenses such medications, dental treatments, eye doctor visits, hospital fees and services. Below are details on medical expenses and medical savings account information.

KEY TAKEAWAYS

• You can deduct medical expenses only if they exceed 7.5% of your Adjusted Gross Income (AGI). For instance, with an AGI of $40,000, only expenses beyond $3,000 are deductible.
• Eligible medical expenses include costs for treatments, prescriptions, and equipment for various health conditions. Items such as dental care, hospital fees, and certain medications qualify for deductions.
• Medical deductions are available only for taxpayers who itemize their deductions on Schedule A. If you take the standard deduction, you cannot claim medical expenses.
• High Deductible Health Plans (HDHPs) allow pre-tax contributions to Health Savings Accounts (HSAs). These plans must meet minimum deductibles but may cover preventive care without a deductible.
• Certain insurance premiums, like those for life insurance or loss of earning policies, are not deductible. However, self-employed individuals can deduct 100% of health insurance premiums for themselves and their families.

Do you have long-term care insurance? Learn what to do with Form 1099-LTC.

Limits on Medical Expense Deductions

The IRS rules for medical deductions limit what you can deduct and how much. Deductible or unreimbursed medical and dental expenses can be deducted if they are above 7.5% of your adjusted gross income or AGI.

For example:

In the case above where your AGI is $40,000 and your total medical and dental expenses are $5,000, you could deduct $2,000 of your medical/dental expenses because $2,000 is the amount above 7.5% of your AGI ($3,000).

For medical expenses that would have been deductible in an earlier tax year, you can amend a tax return.

List of Qualified Medical and Dental Expenses

Medical expenses are the costs associated with the diagnosis, cure, mitigation, treatment, or prevention of any disease recognized by the medical community (this includes chiropractic practices and Christian science) as well as the costs for treatments affecting any area or function of the body. Medical costs include the expenses of equipment, supplies, and diagnostic devices needed for the purposes listed above. They also include dental expenses.

Below is an alphabetical list of qualified medical deductions that might apply to you. Please note that this list is not definitive or all-inclusive:

• Abortion, acupuncture, addiction treatment, ambulance service, annual physical examination, artificial teeth, Autoette
• Bandage, blood sugar test kit, body scan, breast pumps, breast reconstruction surgery, birth control pills, Braille books and magazines
• Capital expenses, car (special equipment), chiropractor, Christian Science practitioner, clinic costs, contact lenses, cosmetic surgery to correct a disfigurement, crutches
• Dental treatments, dentist, diagnostic devices, diagnostic tests, disabled dependent care expenses, doctor visit, drug addiction treatment, drugs (when prescribed by a physician)
• Eye doctor, eyeglasses, eye surgery (including laser)
• Fertility enhancement, founder’s fees
• Guide dog or other helper animal service
• Health institute, health maintenance organization, hearing aids, home care, home improvements, hospital fees and services
• Insulin, insulin treatments, insurance premiums, (care for the) intellectually or developmentally disabled
• Laboratory fees, lactation supplies, lead-based paint removal, learning disability, legal fees, lifetime care, lodging while receiving medical care (up to $50 a person per night)
• Long term care insurance premium deduction and long-term care cost deduction
• Meals, medical conferences, medical examinations, medical information plan, medical services, Medicare Part B supplemental costs, Medicare Part D premiums, prescription medicines (when prescribed by a physician)
• Nursing help, nursing services
• Medical expenses for medical care in a nursing home. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.
• Occupational therapy, operations, optometrist, organ donors, osteopath, oxygen
• Physical examination, physical therapy, podiatrist, pregnancy tests and pregnancy test kit, prescription drugs and medicines, prosthesis, psychiatric care, psychoanalysis, psychologist
• Reconstructive surgery
• Special education, sterilization, stop-smoking programs and prescription drugs, surgery
• Telephone, television, therapy, transplants, transportation*, trips, tuition (under special circumstances)
• Vasectomy, vision correction surgery
• Weight-loss program**, wheelchair, whirlpool baths (if ordered by a doctor), wigs
• X-ray procedures.

*You may deduct transportation expenses that are incurred primarily for medical reasons, such as bus fare to and from the hospital or gas consumed on your way to a medical facility. You may also include the cost of meals if they were purchased at a hospital or similar institution where you were staying for medical care.

**You may deduct expenses incurred for a weight loss program if that weight loss was conducted after the diagnosis of a specific illness by your doctor.

For more information about medical and dental expenses you might be able to deduct, see IRS Publication 502, Medical and Dental Expenses.

High Deductible Health Plan and Health Savings Account

You can use your HSA on certain expenses if your health care spending hasn't surpassed the plan deductible without conflicting the rules allowing pretax contributions to health savings accounts (HSA). You can enroll in this type of healthcare plan with your employer or you can purchase this healthcare plan through the marketplace. If you as an employee or self-employed taxpayer are covered by an HDHP, you may contribute to an HSA with pre-tax dollars. In order to make HSA contributions with pretax dollars, an HDHP may not provide benefits for any year until the minimum deductible for that year is satisfied. However, HDHPs are not required to have a deductible for preventive care.

The IRS added the following chronic condition treatments to the list of preventive care benefits for which a HDHP - high deductible health plan - can pay.

This is list is not all-inclusive - refer to the HSA page or your HSA plan for details on qualifying expenses.

Health Insurance Premiums

Generally, medical care premiums can be included in your calculations of medical expenses. However, there are certain medical insurance premiums that you cannot include when calculating your medical expenses for tax purposes:

• Life insurance policies
• Insurance policies providing payment for loss of earning
• Insurance policies for loss of life, limb, sight, function, etc.
• Insurance policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury
• The part of your car insurance policy that provides medical insurance coverage for all persons injured in or by your car
• Health or long-term care insurance if premiums were paid with tax-free distributions from a retirement plan made directly to the insurance provider without your intercession and these payments would have otherwise been included in your income.

If you are self-employed, you may be able to deduct 100% of the amount you pay for health insurance for yourself, your spouse, and dependents as an adjustment to income (a non-itemized deduction).

See if the Affordable Care Act (Obamacare) may have affected your previous year tax return and health insurance premiums.

Expenses that Are Not Qualified Medical Deductions

There are certain medical expenses that are not deductible. These expenses include:

• Cosmetic surgery
• Dance lessons
• Diaper service
• Electrolysis or hair removal
• Flexible spending account dollars, funeral expenses, future medical care
• Hair transplant, health club dues, health savings account contributions, household help (except nursing help)
• Illegal operations and treatments, insurance premiums
• Maternity clothes, medical savings account, medicines and drugs from other countries
• Nutritional supplements
• Over-the-counter drugs and medicines (unless prescribed by a doctor)
• Personal use items
• Swimming lessons
• Teeth whitening
• Veterinary fees.

You must subtract all reimbursements that you have received for medical or dental expenses from any source throughout the year from your calculation of total medical expenses.

If the cost of medical equipment or property was deducted from your taxes in a previous year and you sell that equipment in a later year for a profit, you may have to report a capital gain on your tax return. The taxable gain is the amount of the selling price more than the adjusted basis of the equipment or property.

For detailed information on medical and dental expense deductions, see IRS Publication 502, Medical and Dental Expenses (including the Health Coverage Tax Credit).

Did you purchase health insurance through the Marketplace? You may qualify for the Premium Tax Credit which you can use to help make health insurance more affordable. See what other tax deductions you may qualify to claim on your tax return.

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