You can deduct medical and dental expenses on your Schedule A to the extent they exceed 7.5 percent of your adjusted gross income. And if all your Schedule A deductions (including property taxes, state income taxes, charitable contributions, etc.) exceed the standard deduction to which you are otherwise entitled, you’ll end up with a bigger tax refund. The list of items that qualify as medical and dental expenses is much more expansive than most people realize.
Capital expenses
Amounts paid for improvements or special equipment installed in your home are medical expenses (e.g., an electric chair lift or railings in the bathroom) if their main purpose is medical care for you, your spouse, or your dependent. The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. If the value of your property isn’t increased by the improvement, the entire cost is included as a medical expense. In this situation, it is advisable to have a tax accountant or CPA assist in determining the deductible amount.
Dental expenses
Medical expenses include amounts paid for teeth cleaning, X-rays, fillings, braces, extractions, dentures, and other dental ailments.
Health insurance premiums
Premiums paid for health insurance qualify as a medical expense. Also, premiums paid for Medicare Part B and Part D qualify as medical expenses, and premiums for Medicare Part A may be deductible if you voluntarily enrolled in Medicare Part A.
Long-term care services and insurance premiums
Medical expenses also include amounts paid for qualified long-term care services. Long-term care premiums up to certain amounts, depending on your age, are also deductible medical expenses and, if you are self-employed, can be used in calculating the self-employed health insurance deduction on IRS Form 7206.
Planning for long-term care is a crucial aspect of aging that a certified financial planner or CPA can help you with. A well-thought-out long-term care plan will give you more control over future healthcare decisions and help preserve your assets for other important goals.
Medicines
You can include in medical expenses amounts paid for prescribed medicines and drugs, as well as amounts paid for insulin. Except for insulin, you can’t include in medical expenses the amounts you pay for a drug that isn’t prescribed.
Nursing home and nursing services
Medical expenses include the cost of medical care in a nursing home or similar institution for yourself, your spouse, or your dependents. This includes wages and other amounts paid for nursing services. The services don’t need to be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services such as giving medication or changing dressings, as well as bathing and grooming the patient. These services can be provided in your home or another care facility. Generally, only the amount spent on nursing services is a medical expense. Employment taxes relating to the nursing services are also considered medical expenses.
Medical operations
Medical expenses include amounts paid for operations other than certain types of cosmetic surgery, such as liposuction, facelifts, etc. However, you can include in medical expenses amounts paid for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease.
Example: Ann undergoes surgery that removes a breast as part of her cancer treatment. She pays a surgeon to reconstruct the breast. The surgery to reconstruct the breast corrects a deformity directly related to the disease, and the cost of the surgery is included in Ann’s medical expenses.
Physical exam
You can include in medical expenses the amount you pay for an annual physical examination and diagnostic tests by a physician.
Transportation
Medical expenses include amounts paid for transportation primarily for, and essential to, medical care. This includes out-of-pocket expenses, such as the cost of gas and oil. However, you can’t include depreciation, insurance, general repair, or maintenance expenses. You can also use a standard medical mileage rate for the relevant year.
Weight-loss program
You can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease).
Wheelchair
You can include in medical expenses the amounts you pay for a wheelchair used for the relief of a sickness or disability, as well as the cost of operating and maintaining the wheelchair.
As you can see, several medical expenses can help reduce your taxes, and this is just a partial list. A tax professional can assist in determining if you have enough medical deductions to forgo the standard deduction and reap a bigger tax refund.
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