Medical Deductions and Medical Expenses

The list provided here is intended for a high level overview and understanding of medical deductions you might be able to claim on your tax return.

Everything stated here might have exceptions. During the tax interview on efile.com you will be prompted to enter the necessary information.

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.

Generally medical deductions are expenses you pay for yourself, or your spouse or dependents at the time the service was provided or the payment was made. Only include expenses you paid during the tax year.
(Note: Medical/dental expenses that would have been deductible in an earlier tax year, please submit Form 1040X) You can only deduct medical/dental expenses above 7.5 % of your Adjusted Gross Income (AGI).

For example:
Your AGI is: $ 40,000.
7.5 % is: $ 3,000
Your medical expenses are: $ 2,500
You cannot deduct your medical expenses because your expenses are not more than 7.5% of your adjusted gross income. If your medical expenses were $3,500, you would be able to deduct $500 dollars from your taxes.

List of medical deductions that might apply to you: (more detailed information)

• abortion, acupuncture, alcoholism, ambulance, annual physical examination, artificial teeth, autoette
• bandage, body scan, breast reconstruction surgery, birth control pills, Braille books and magazines
• capital expenses, car (special equipment), chiropractor, Christian Science practitioner, contact lenses, crutches
• dental treatment, diagnostic devices, disabled dependent care expenses, drug addiction, drugs
• eyeglasses, eye surgery
• fertility enhancement, founder’s fee
• guide dog or other animal service
• health institute, health maintenance organization, hearing aids, home care, home improvements, hospital services
• insurance premiums, special home for intellectually or developmentally disabled
• laboratory fees, lead-based paint removal, learning disability, legal fees, lifetime care, lodging, long-term care
• meals, medical conferences, medical information plan, medical services, medicines
• nursing home, nursing services
• operations, optometrist, organ donors, osteopath, oxygen
• physical examination, pregnancy test kit, prosthesis, psychiatric care, psychoanalysis, psychologist
• special education, sterilization, stop-smoking programs, surgery
• telephone, television, therapy, transplants, transportation, trips, tuition (under special circumstances)
• vasectomy, vision correction surgery
• weight-loss program, wheelchair, wig
• x-ray.

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.

If you are self employed you may be able to deduct 100% of the amount you pay for medical insurance for yourself and your spouse and dependents as an adjustment to income.

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.

Expenses That are Not Medical Deductions

There are certain medical expenses that are not deductable. These expenses include:

• baby sitting
• controlled substances, cosmetic surgery
• dance lessons, diaper service
• electrolysis or hair removal
• flexible spending account, funeral expenses, future medical care
• hair transplant, health club dues, health coverage tax credit, health savings accounts, household help
• illegal operations and treatments, insurance premiums
• maternity clothes, medical savings account, medicines and drugs from other countries
• nonprescription drugs and medicines, nutritional supplements
• personal use items
• swimming lessons
• teeth whitening
• veterinary fees
• weight-loss program.

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 (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 80% of your health insurance premiums.

To qualify for the credit, you must receive TAA or PBGC payments, and your employer must not pay more than 50% of your health insurance premiums. In addition, you must NOT be:

• Enrolled in Medicare (Part A or Part B)
• Enrolled in Medicaid
• Enrolled in CHIP (Children's Health Insurance Program)
• Enrolled in COBRA and receiving the 65% premium reduction/COBRA subsidy
• Enrolled in FEHBP (Federal Employees Health Benefits Program)
• Enrolled in TRICARE (the U.S. Military's health system)

The HCTC is claimed using Form 8885, Health Coverage Tax Credit, which the efile.com tax software will generate for you when you efile with us.

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