Tax Deductions for Medical Expenses
The IRS allows you to deduct a certain amount of medical expenses if you itemize deductions.
Qualified medical deductions are expenses you paid during the tax year for yourself, your spouse, or your dependents.
List of Qualified Medical 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), and 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 (more detailed information). 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 treatment, 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 fee
- 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
- meals, medical conferences, medical examinations, medical information plan, medical services, Medicare Part B supplemental costs, Medicare Part D premiums, medicines (when prescribed by a physician)
- nursing home, nursing services
- 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), wig
*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.
**You may deduct transportation expenses that are incurred primarily for medical reasons, e.g. bus fare to and from the hospital, 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.
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 the 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).
Limits on Medical Expense Deductions
You can only deduct medical expenses that are above 7.5% of your Adjusted Gross Income (AGI). This is called an "AGI floor".
Your AGI is: $40,000.
7.5 % is: $3,000
Your medical expenses are: $2,500
In this case, you could not deduct your medical expenses because your expenses are not more than 7.5% of your adjusted gross income. But if your medical expenses were $3,500, you would be able to deduct $500 dollars from your taxes.
ATTENTION: Under current law, the Affordable Care Act will increase the AGI floor for medical expense deductions to 10% beginning in 2013.
For medical expenses that would have been deductible in an earlier tax year, you can amend a tax return.
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 property in a later year for a profit you may have to record a capital gain. The taxable gain is the amount of the selling price more than the adjusted basis of the equipment or property.
Detailed information on medical and dental expense deductions
The Health Coverage Tax Credit (HCTC)
If you are the recipient of Trade Adjustment Assistance (whether TAA, ATAA, or RTAA) or the recipient of Pension Benefit Guaranty Corporation (PBGC) payments, you should know about a credit designed to help you pay for health insurance. If you qualify, the Health Coverage Tax Credit may pay for up to 72.5% of your health insurance premiums. The HCTC is a refundable credit, so it will be paid to you even if you owe no tax at the end of the year.
To qualify for the credit, you must receive Trade Adjustment Assistance, or be age 55 or older and receive PBGC payments. Also, you must be enrolled in a qualified health plan and 50% or more of your health insurance premiums must not be covered by your employer(s). In addition, you must NOT be enrolled in any of the following programs:
- Medicare Part A, Part B, or Part C (or only enrolled to claim premiums for qualified family members)
- CHIP (Children's Health Insurance Program)
- FEHBP (Federal Employees Health Benefits Program)
- TRICARE (the U.S. Military's health system) (even if not enrolled, you must not be eligible)
In addition, to qualify for the HCTC, you must not be:
- Claimed as a dependent on another tax return
- In prison under federal, state, or local authority
The Health Coverage Tax Credit is claimed using Form 8885, Health Coverage Tax Credit efile it. The efile tax software will generate the form for you when you prepare your tax return on efile.com.
You may elect to receive the HCTC monthly instead of as a credit at tax time. If you choose monthly payments, you will send 27.5% of your insurance premium payment to the HCTC Program, which will add the remaining 72.5% of the premium payment and send it to your health plan. To enroll in the monthly program, you will need the HCTC Program Kit. After you apply for Trade Adjustment Assistance or begin receiving PBGC payments you should receive a copy of the HCTC Program Kit in the mail. This kit will guide you through the process of applying for monthly Health Coverage Tax Credit payments.
For individual assistance with the HCTC, you may call the IRS Health Coverage Tax Credit hotline at 1-866-628-HCTC.
See what other tax deductions you may qualify for.