What Out of Pocket Medical Expenses Are Tax Deductible?
Medical expenses can be a significant financial burden, especially when dealing with unexpected health issues. However, the good news is that certain out-of-pocket medical expenses may be tax deductible. Understanding which expenses qualify for a deduction can help alleviate some of the financial strain. In this article, we will explore what out-of-pocket medical expenses are tax deductible and how to determine if your expenses meet the criteria.
What Qualifies as a Tax-Deductible Medical Expense?
The IRS defines a tax-deductible medical expense as any amount paid for medical care that is not reimbursed by insurance or covered by another third-party payer. To be deductible, the expense must be primarily for the prevention, diagnosis, treatment, or mitigation of disease. Here are some common examples of out-of-pocket medical expenses that may be tax deductible:
1. Doctor’s visits and consultations
2. Prescription medications and over-the-counter drugs
3. Dental expenses, including cleanings, fillings, and crowns
4. Hospital stays and surgery costs
5. Physical therapy and rehabilitation services
6. Prescription eyewear and contact lenses
7. Mileage for medical appointments (at a rate of 24 cents per mile)
8. Parking fees and tolls for medical appointments
9. Medical supplies and equipment (such as crutches, wheelchairs, or oxygen tanks)
10. Insurance premiums for long-term care or disability insurance
How to Determine If Your Expenses Are Tax Deductible
To determine if your out-of-pocket medical expenses are tax deductible, you must meet the following criteria:
1. The expense must be unreimbursed: If your insurance or another third-party payer covers a portion of the expense, only the unreimbursed portion is deductible.
2. The expense must be for medical care: The IRS defines medical care as the diagnosis, cure, mitigation, treatment, or prevention of disease in a human being. This includes medical care for any person who is a dependent on your tax return.
3. The expense must be paid during the tax year: You can only deduct expenses paid during the tax year for which you are filing.
4. The expense must exceed a certain threshold: For the tax year 2021, you can deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). This threshold is adjusted periodically, so be sure to check the current year’s percentage.
How to Claim the Deduction
To claim the deduction for out-of-pocket medical expenses, you will need to itemize deductions on Schedule A of your tax return. List all eligible medical expenses and subtract the unreimbursed portion from the total. If the total exceeds the 7.5% threshold of your AGI, you can deduct the difference.
Remember, it’s crucial to keep detailed records of all medical expenses, including receipts, invoices, and insurance Explanation of Benefits (EOBs) to substantiate your deductions. By understanding what out-of-pocket medical expenses are tax deductible, you can potentially reduce your taxable income and save money on your taxes.
