Medical expenses can represent a significant portion of our yearly income, with the average American spending almost $10,000 a year on health care. This might sound like quite a financial burden since there aren’t many options available when we need to cover medical charges. However, medical expenses can be deducted from our income tax report, which can give us a hand when the time to file our taxes arrives. Here’s what you need to know about deducting your medical expenses.
The very first aspect we need to understand when it comes to deducting your medical expenses is the deduction value that the IRS allows. Starting this year, taxpayers will be able to deduct the medical expenses that exceed 10% of their adjusted gross income. The AGI consists of your taxable income minus any adjustments like deductions or contributions. If your AGI equals $56,000, and you spent $9,500 in health care expenses, you’d be able to deduct the expenses that exceed $5,600, which equals $3,900 in this scenario.
Another important aspect we need to be aware of is the types of medical expenses that can qualify as deductions, and which ones can’t. There are several expenses that the IRS allows to be deducted as medical expenses, including:
- Preventive care
- Dental and vision care
- Visits to psychologists and psychiatrists
- Prescription medications and appliances
- Travel expenses for medical care
On the other hand, there are other health-related expenses that do not qualify for deductions, such as cosmetic procedures, non-prescription drugs with exception of insulin, general health products like toothpaste and vitamins, as well as medical expenses that may be reimbursed, whether by your employer or your insurance company.
If you want to apply for the deduction of your medical expenses for this year, you need to learn the process of claiming such deduction. To begin with, you need to choose an itemized deduction instead of a standard deduction. Keep in mind that you can only opt for an itemized deduction when it will exceed the standard deduction, so remember to consult with your tax prepared beforehand. In order to itemize your deduction, you will need to use Form 1040 and attach the Schedule A form, on which you will report the total you paid for medical expenses during the year and your adjusted gross income.