Medical Expense Tax Deduction

Writing off medical and dental expenses as an itemized deduction on Schedule A

Dentist examining woman's mouth
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On-going from the year 2013, individuals can deduct medical expenses as an itemized deduction only if they are over 10% of your adjusted gross income. Itemized deductions are filed on your form Schedule A. Before 2013, medical expenses could be deducted if they exceeded 7.5% of your adjusted gross income.

Deducting Medical Expenses for the Taxpayer, Dependents, and in some cases for Non-Dependents

Individuals can deduct medical expenses for themselves, their spouse and their dependents as an itemized deduction.

Additionally, taxpayers can deduct medical expenses for a person who did not qualify as a dependent though otherwise might have in the following circumstances:

  • "Your child whom you do not claim as a dependent because of the rules for children of divorced or separated parents."
  • "Any person you could have claimed as a dependent on your return except that person received $3,900 or more of gross income or filed a joint return."
  • "Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's return" (from the Instructions for Schedule A).

Special Rules for Dependents of Separated Parents

Taxpayers can deduct medical expenses for their children, even if the taxpayer allows the child's other parent to claim the child as a dependent. In this situation, each parent can deduct the medical expenses each of them has paid for the child.

The parent who does not claim the dependent can still deduct the child's medical expenses under the special rule for children of separated parents. And the other parent can deduct the child's medical expenses they paid for under the general rule that permits people to deduct medical expenses for themselves and their dependents.

Special Rules for Non-Dependents earning over the Personal Exemption Amount

Taxpayers can deduct medical expenses they paid for persons who would otherwise qualify as a dependent except that the person earns more than the personal exemption amount during the year. The IRS gives the following example of this special rule:

"You provided over half of your mother's support but cannot claim her as a dependent because she received wages of $3,900 in 2013. You can include on line 1 any medical and dental expenses you paid in 2013 for your mother" (from the Instructions for Schedule A).

In this example, while the mother did make over the personal exemption amount, the filer was still able to claim “any medical or dental expenses” that he had paid for his mother in the year 2013 by just reporting those figures on their Schedule A. 

Only Out-of-Pocket, After-Tax Expenses are Included in the Medical Expense Deduction

Only medical expenses that are not reimbursed by insurance are included in the medical expense deduction. For example, if a prescription medication costs $50, and you pay $30 and your insurance pays the other $20 of the cost, you can deduct only the $30 that you paid.

Similarly, any medical expenses paid using pretax dollars from a flexible spending account, health savings account or health reimbursement arrangement are not included in the itemized deduction for medical expenses.

What Types of Costs Can Be Deducted as a Medical Expense

To be tax-deductible, the expense must satisfy one of the following conditions:

  • Be related to the diagnosis, cure, mitigation, treatment or prevention of disease,
  • Treatment that affects any structure or function of the body,
  • Transportation to and from medical care,
  • Long-term care services, or
  • Insurance for medical care or long-term care. (Internal Revenue Code section 213(d)(1))

"Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness," the IRS notes in Publication 502, however "they do not include expenses that are merely beneficial to general health, such as vitamins or a vacation." Treatments provided by physicians, surgeons, dentists, chiropractors, psychologists, psychiatrists and similar medical professionals can be deducted.

The IRS provides a fairly long list of examples of medical expenses that qualify for the deduction. This list is found in Publication 502.

When to Deduct Medical Expenses

Deduct medical expenses in the year you paid the expense by cash, check or credit card, even if medical services were provided in a different year.

Where to Deduct Medical Expenses on the Tax Return

Medical expenses are deducted on Schedule A, Line 1. Lines 2 and 3 of Schedule A calculate the limitation on medical expenses. Line 4 of Schedule A shows the deductible portion of medical expenses.

Limitations on the Medical Expense Deduction

Medical expenses are deductible to the extent that the total of all your medical expenses exceeds 10% of your adjusted gross income. In other words, tally up all your medical expenses, and then subtract 10% of your adjusted gross income. This 10% limit functions as a floor or threshold: amounts under the 10% floor are not deductible. The 10% floor is new for 2013. In 2012 and previous years, the floor was 7.5% of adjusted gross income.

However, people who have reached age 65 by the end of the year have a lower medical deduction threshold of 7.5% of adjusted gross income. The 7.5% of adjusted gross income threshold remains in effect for the years 2013 through 2016 for people who are age 65 and older.

Special Rules

Special Rules for Deducting Health Insurance

Individuals can deduct premiums for health, dental, long-term care and vision care insurance, but only if those premiums were paid using after-tax dollars. Persons who have group insurance through their employer usually pay these premiums with pre-tax dollars.

Individuals can deduct premiums for non-dependents only if the non-dependent meets one of the three exceptions described above.

Medicare part A premiums can be deducted if a taxpayer is not covered under Social Security and voluntarily enrolled in Medicare part A.

Medicare part B premiums and Medigap premiums can be deducted.

Medicare part D prescription drug insurance premiums can be deducted.

Deductions for long-term care are limited. For 2013, the maximum amount that can be deducted for long-term care insurance premiums:

AgeMaximum Long Term Care Deduction
40 or under$360
41-50$680
51-60$1,360
61-70$3,640
71+$4,550

 

Special Rules for Medical-Related Transportation

An individual can deduct the cost of transporting themselves to and from a health care facility. The transportation must be "primarily for, and essential to, medical care" (Publication 502). The following expenses can be included in the cost of medical-related transportation:

  • "Bus, taxi, train, or plane fares or ambulance service,
  • "Transportation expenses of a parent who must go with a child who needs medical care,
  • "Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and
  • "Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment" (Publication 502).

If a person travels by car, the person can deduct the miles they drove using the standard mileage rate for medical purposes, which is 24 cents per mile for the year 2013. The cost of parking and road tolls is added to the standard mileage rate.

Making the Most out of Your Medical Expense Tax Deductions

  • Prepay medical expenses
  • Shift out of pocket expenses into flexible spending accounts, health reimbursement arrangements or health savings accounts
  • Include all deductible medical expenses for every qualifying member in household

 

Prepaying medical expenses is a strategy for increasing your medical deductions. For example, suppose you have enough medical expenses to put you over the 10% of adjusted gross income threshold this year, but next year you probably won't have enough expenses to get over the threshold. You may want to prepay some medical expenses so that you can boost your medical deduction for the year in which you'll be able to take the deduction.

Delay paying medical expenses is a strategy for moving your medical deductions to a year in which you will have enough medical expenses to be able to take the deduction. Suppose that you have $500 in medical expenses this year, but next year you'll have $10,000 of medical expenses. You may want to delay the $500 in medical expenses and pay it in the following year, when it can be added to the $10,000 of expenses.

Shift out-of-pocket medical expenses into flexible spending accounts, health savings accounts or health reimbursement arrangements, if possible. This is a strategy for being able to deduct the full amount of your medical expenses. Using a flexible spending account through your employer, you can set aside pre-tax dollars from your wages, and then use those pre-tax dollars to pay for your medical and dental expenses. The same goes for health savings accounts. One downside, though, is that not all employers offer flexible spending accounts or health reimbursement arrangements.

Be sure to include all eligible expenses if you are going to take the medical deduction. There are a wide variety of expenses that qualify to be deducted, some of which are quite surprising. Bandages? Deductible. Vitamins? Not deductible. Expenses related to guide dogs for the blind? Deductible. See Publication 502 for a list of all IRS-approved medical expenses.

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