Tax-Deductible Medical Expenses

IRS web page on tax-deductible medical expenses

In the last few months, I have segued into topics other than tax resistance but thought I would return to it since the end of the year is almost here and it seems like a good time to review tax reduction strategies. This post focuses on which medical expenses are tax-deductible and which are not.

Note that you may only deduct medical expenses if they exceed 7.5% of your adjusted gross income.  Adjusted gross income is the amount of money you earn minus certain allowable deductions like contributions to retirement funds. Note that if you are self-employed and have a net profit for the year, you may deduct the cost of insurance premiums for you and your family in the adjusted gross income portion of the tax return.

Deductible expenses for yourself, a spouse, or a dependent declared on your tax return include:

• All fees paid to doctors, dentists, psychologists, psychiatrists, chiropractors, and acupuncturists.
• Costs of all prescription drugs
• Cost of insulin, even if it is not specifically prescribed
• Costs of registering for and attending medical conferences and symposia related to a diagnosed illness. Note, however, that the costs of lodging and meals are not deductible.
• Cost of orthodontic care
• In general, you may deduct the costs of premiums for health care insurance or long-term care insurance unless you have paid for them through a cafeteria plan because money in cafeteria plans is usually not taxed anyway.
• Cost of weight loss programs if you have been diagnosed as obese by a doctor.  You may not, however, deduct the cost of any foods provided by the program.
• Costs of false teeth, prescription eye glasses, hearing aids, guide dogs for the blind and deaf.

In calculating your medical deductions, you must subtract the cost of any reimbursement, regardless of whether the reimbursement is paid directly to you or to a health care provider.  For example, if you have a medical bill for $1,000 and insurance pays $800, you can only deduct $200 on your taxes.

Medical expenses that are not tax-deductible include:

• Over-the-counter medications
• Cosmetic surgery or other procedures unless they are part of treatment for specific medical conditions
• Premiums for life insurance policies or policies that provide money for lost wages due to illness.
• Funeral or burial expenses
• Cost of programs for the general improvement of health as opposed to the improvement of specific conditions.

A good way of pushing medical costs over the magic 7.5%  limit of adjusted gross income is to pay medical expenses you know you will have next year before the end of this year. For example, pre-pay the orthodontist who is straightening your kid's teeth or the chiropractor you see regularly for your bad back.  This is especially useful if you expect to have fewer medical expenses the next year and are fairly certain you won't be able to cross the 7.5 % threshold the next year.