If you thought reaching the threshold for 7.5% of your adjusted gross income to claim medical expenses was out of reach, think again. There may be items that qualify as unreimbursed medical expenses that you weren’t aware of, which could allow you to itemize and claim this deduction. This newsletter will provide an overview of what is considered a qualified medical expense, as well as the tax implications for elder care medical expenses.
According to the IRS, medical expenses are the cost of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. These expenses must be primarily to alleviate or prevent a physical or mental disability, or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.
How much of the expenses can you deduct?
Taxpayers generally itemize deductions if the total amount is greater than the standard deduction. In 2024, the standard deduction is $14,600 for individuals and $29,200 for joint filers. For filers over 65, there is an additional deduction amount of $1,550 per person for married filing jointly or separately, and $1,950 if unmarried and not a surviving spouse. You will need to itemize to take advantage of the medical expense deduction, which must be more than 7.5% of your adjusted gross income. For example, if your adjusted gross income (AGI) is $60,000, you multiply it by 0.075 (7.5%) to get $4,500, which is your threshold. Everything above $4,500 is deductible for qualifying medical expenses. The IRS does not have a limit on the amount you can deduct once you meet the threshold amount of your AGI.
Other Qualifications For the Deduction
The spending must have been on treatment for you, your spouse, or your dependents. It also must have been unreimbursed by insurance or any other program, including FSA or HSA funds. In general, the treatment must be necessary rather than optional or cosmetic. You can only include expenses paid during the tax year.
Recordkeeping
Retain a statement or itemized invoice that includes what medical care was received; who received the care; the nature and purpose of the medical expenses; and the amount of other medical expenses.
Trips and Lodging
If you need to travel away from your home to receive medical care at a hospital or similar institution, you can include the cost of the trip and such lodging when away from home if: the lodging is primarily for and essential to medical care; the medical care is provided by a doctor in a licensed hospital or medical care facility related, or equivalent to, a licensed hospital; the lodging isn’t lavish or extravagant ($50 per night for each person if someone is traveling with the one receiving medical care); and there is no significant element of personal pleasure, recreation, or vacation in the travel away from home.
Below is a list of some of the items that may qualify as a medical expense. Visit www.irs.gov/pub502 to see a full list of both eligible and non-eligible medical expenses.
• Acupuncture
• Ambulance
• Artificial teeth
• Bandages
• Birth control pills (prescription)
• Breast pumps and supplies
• Car (with special hand controls)
• Chiropractor
• Dental treatment
• Drug and alcoholism addiction and treatment
• Eye exam (eyeglasses, contact lenses, eye surgery)
• Hearing aids
• Hospital services
• In vitro fertilization
• Laboratory fees
• Lead-based paint removal
• Long-term care (medical expenses and certain amount of premiums paid for insurance contracts)
• Meals (inpatient care)
• Mileage (22 cents per mile for driving to medical appointments)
• Nursing home expenses
• Prescription drugs
• Psychiatric care
• Psychologist
• Out-of-pocket expenses and co-pays
• Special education
• Smoking cessation programs (prescription required)
• Surgery
• Special telephone equipment
• Television for the hearing disabled
• Transportation
• Weight-loss programs (for a doctor-diagnosed disease)
• Wheelchair
• Wig
Qualified Long-Term Care Insurance Contracts
Long-term care insurance contracts are medical expense deductions if it is: guaranteed renewable; does not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed; must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and the dividends under the contract must be used only to reduce future premiums or increase future benefits; and generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare (except where Medicare is a secondary payer), or the contract makes per diem or other periodic payments without regard to expenses. The amount of deduction is limited by age. See the IRS website for more specific information: www.irs.gov/pub502.
Insurance Premiums
You can include the cost for insurance policy premiums that you pay for to cover medical care such as hospitalization, surgical services, X-rays, prescription drugs and insulin, dental care, replacement of lost or damaged contact lenses, and long-term care contracts. You cannot include medical expense insurance premiums that were paid and for which you are claiming a credit or deduction. You normally cannot include medical insurance premiums paid by an employer-sponsored health insurance plan unless they are included on your Form W-2 and Tax Statement. Your part of these premiums is usually pre-tax. COBRA insurance premiums are eligible for a tax deduction as a medical expense.