The Medical Expense Tax Deduction for Tax Year 2019

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Most taxpayers can claim medical expenses that exceed a percentage of their adjusted gross incomes (AGIs), subject to certain rules. The threshold was 10% from 2013 through 2016, but these expenses were deductible when they exceeded just 7.5% of a taxpayer's AGI before 2013.

Then along came a flurry of federal legislation in 2018 and 2019, dropping that 10% percentage threshold, then increasing it and finally dropping it again. The bottom line is that the medical expense deduction is once again taxpayer-friendly in 2020, at least for the time being.

The Effect of Tax Cuts and Jobs Act 

The threshold for deductible medical expenses was supposed to remain at 10% in 2016, but the Tax Cuts and Jobs Act (TCJA) tweaked that in a favorable way. It dropped the threshold back to 7.5% for 2017 and 2018. You could claim the deduction for medical expenses that exceeded just 7.5% of your AGI in these years.

The Taxpayer Certainty and Disaster Tax Relief Act

The medical expense deduction was supposed to go back up to 10% of a taxpayer's AGI beginning in January 2019, but then came the Taxpayer Certainty and Disaster Tax Relief Act of 2019, signed into law by President Trump on Dec. 20, 2019.

Specifically, Section 103 of Title I of this law provides that "7.5%" should replace "10%" for all tax years beginning before Jan. 1, 2021. So, yes, we're back to 7.5%, at least for tax years 2019 and 2020.

The Deduction and Your AGI Threshold: An Example 

You can calculate the 7.5% rule by tallying up all your medical expenses for the year, then subtracting the amount equal to 7.5% of your AGI. For example, your threshold is $4,875 or 7.5% of $65,000 if your AGI is $65,000. You can find your AGI on line 8b of your 2019 Form 1040.

Your AGI appears on line 7 of the 2018 Form 1040. The IRS has been busy changing up this tax form since the TCJA went into effect, doing so twice both for the 2018 and 2019 tax years. You won't find the same information in the same old places anymore.

Your deduction would therefore be $5,125—the balance over that $4,875 threshold—if you have $10,000 in qualified medical expenses.

Unfortunately, you don't get to claim the full $10,000, but this is still a lot better than 10% rule that was in place in 2016. Your deduction would have been just $3,500 back then, or the balance over a $6,500 threshold at 10% of a $65,000 AGI.

You Must Itemize to Claim the Deduction

You have to itemize your deductions to claim the medical expense deduction, which means that you must complete and file Schedule A with your tax return. This could be worth your while if you're eligible to claim several other itemized deductions as well so they all add up to more than the year's standard deduction, but this can be a bit of a stretch in 2020.

You can't claim the standard deduction and itemize, too—it's one or the other. This rule has a much greater impact in tax years 2018 and going forward because the TCJA also nearly doubled standard deductions for all taxpayers.

The 2020 standard deduction increases from $12,200 in 2019 to $12,400 for single taxpayers. For head of household filers, it goes up from $18,350 to $18,650. If you're married and filing a joint return with your spouse, it jumps from $24,400 to $24,800, although if you and your spouse file separate returns, it's $12,400, just the same as if you were single.

These deductions were set at just $6,300, $9,300, and $12,600 in the 2016 tax year.

If you don't have itemized deductions that total more than the standard deduction amounts, you'll pay taxes on more income than you have to if you don't claim the standard deduction instead.

If it does turn out that itemizing is in your best interest, medical expenses can be deducted on line 1 of the 2019 Schedule A. Completing lines 2 and 3 of Schedule A calculates the threshold limitation on medical expenses, and line 4 shows the deductible portion of what you paid.

Who Can Receive Treatment?

You can deduct medical expenses paid for yourself, your spouse, and/or your dependents. You might also be able to deduct expenses for someone who doesn't qualify as your dependent but would have qualified except for the following circumstances.

According to the IRS, you can claim medical expenses for your non-dependent if:

  • You did not claim your child as a dependent because of the rules for children of divorced or separated parents.
  • You did not claim an individual as a dependent on your return because that person earned $4,200 or more in gross income as of 2019, or because they filed a joint return.
  • You did not claim a person as a dependent on your return because that person could be claimed as a dependent on someone else's return.

Taxpayers can deduct medical expenses they paid for persons who would otherwise have qualified as their dependents except they earned more than the personal exemption amount for that tax year.

The TCJA eliminated personal exemptions from the tax code, but the equivalent of how much they would have been in a given tax year still affects dependent eligibility.

A taxpayer can deduct medical expenses for their child even if the child's other parent claims the child as a dependent. In this situation, each parent can deduct the medical expenses they personally paid on behalf of the child.

The parent who doesn't claim the dependent can 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 under the general rule that permits taxpayers to deduct medical expenses for themselves and their dependents.

Pre-Tax Expenses Aren't Deductible

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

Similarly, any medical expenses paid from a flexible spending account, a health savings account, or a health reimbursement arrangement are not included in the itemized deduction for medical expenses. These accounts already provide a tax advantage, and you can't double-dip.

Deductions That Are Allowed 

According to Internal Revenue Code section 213(d)(1), medical expense must satisfy one of the following conditions to be tax-deductible: 

  • They must be related to the diagnosis, cure, mitigation, treatment, or prevention of disease.
  • The treatment must affect any structure or function of the body.
  • Expenses associated with transportation to and from medical care qualify.
  • Long-term care services qualify.
  • Insurance for medical care or long-term care are covered.

The IRS states in Publication 502 that:

Medical care expenses must be provided to "alleviate or prevent" a mental physical or mental impairment or illness. Expenses that are merely beneficial to general health, such as vitamins, aren't covered, but treatments and prescriptions provided by physicians, surgeons, dentists, chiropractors, psychologists, psychiatrists, and similar medical professionals can be deducted.

Special Rules for Some Health Insurance 

Health insurance premiums are subject to certain rules. You can deduct premiums for health, dental, and vision care insurance, but only if the premiums are paid using after-tax dollars. Those who have group insurance through their employer usually pay these premiums with pre-tax dollars.

Medicare Part A premiums can be deducted if a taxpayer isn't covered under Social Security and is 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 as well.

Medical-Related Transportation Costs

You can deduct the cost of transportation to and from a healthcare facility if you couldn't receive medical care without traveling. 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
  • Transportation expenses for regular visits to see a mentally ill dependent if these visits are recommended as a part of treatment

You can deduct the miles using the standard mileage rate for medical purposes if you travel by car: 18 cents per mile in 2018, increasing to 20 cents a mile in 2019 but dropping to 17 cents in 2020. You can add the cost of parking and road tolls to this rate.

The Bottom Line

You can only deduct medical expenses in the year you paid them, although payment can be by cash, check, or credit card. This is the case even if medical services were provided in a different year, such as if you underwent treatment in December 2018 but paid the bill in January 2019. You would then claim the deduction on your 2019 tax return when you file it in 2020.

Article Sources

  1. Congress.gov. "H.R.3301 – Taxpayer Certainty and Disaster Tax Relief Act of 2019." Accessed Jan. 4, 2020.

  2. Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020." Accessed Jan. 4, 2020.

  3. Internal Revenue Service. "Itemize or Choose the Standard Deduction." Accessed Jan. 4, 2020.

  4. Internal Revenue Service. "Schedule A Itemized Deductions." Accessed Jan. 6, 2020.

  5. Internal Revenue Service. "2019 Instructions for Schedule A (2019)." Accessed Jan. 4, 2019.

  6. Internal Revenue Service. "Publication 502 (2018) Medical and Dental Expenses." Accessed Jan. 6, 2020.

  7. Internal Revenue Service. "IRS Issues Standard Mileage Rates for 2020." Accessed Jan. 4, 2020.