Deduction Dangers, Part 3: Medical and Dental Expenses
Find out which medical and dental expenses are deductible and how to claim them on your taxes—plus, some tax traps to avoid.
In the first installment of this 3-part Deduction Dangers series, I told you about the mortgage interest deduction and some common mistakes that can trip up homeowners. In the second installment, I told you how to deduct your job-related expenses and a few exceptions and dangers to avoid.
In this final installment, I’ll tell you which medical and dental expenses can help lower your tax bill and how to claim them.
What is the Medical and Dental Tax Deduction?
What may surprise you about the medical and dental tax deduction is the wide variety of expenses allowed by the IRS. To make sure you don’t miss any, it’s a good idea to get familiar with the complete listopens PDF file .
Before we get into specific expenses, it’s important to know that qualified medical expenses are “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatments affecting any structure or function of the body.”
When you pay for medical and dental care for yourself, your spouse, or your dependents, you’re entitled to deduct the amount that exceeds 7.5% of your adjusted gross income or AGI.
Let’s say you have AGI of $50,000 in 2012 and you spend $4,000 on qualified medical expenses. When you multiply $50,000 by 7.5%, you find that you’d need a minimum of $3,750 ($50,000 x 7.5%) in total medical expenses to qualify for this deduction. So if you had $4,000 in medical expenses, you could deduct any amount over the threshold of $3,750, or just $250 ($4,000 – $3,750)—not the full amount of $4,000.
And by the way, starting in 2013, the threshold for the medical deduction will get bumped up from 7.5% to 10% of AGI, making it a little more difficult to take advantage of.
Who Can Claim the Medical and Dental Tax Deduction?
To claim a tax deduction for medical expenses you have to meet the following 2 conditions:
- You must file taxes on Form 1040opens PDF file and itemize deductions on Schedule Aopens PDF file .
- You must have qualified medical expenses that were not reimbursed (no matter if you receive a reimbursement or it’s paid directly to a doctor or hospital).
What Medical and Dental Expenses are Tax Deductible?
Some common tax-deductible medical expenses include:
- Fees paid to doctors, dentists, psychologists, and psychiatrists
- Hospital or nursing home care (including the cost of meals and lodging)
- Prescription drugs and insulin
- Eye exams, eyeglasses, and contact lenses (including cleaning equipment and solution)
- Hearing aids
- Crutches and wheelchairs
- Transportation costs essential to receive medical care, including ambulance service
Besides these ordinary expenses, don’t miss the non-traditional medical expenses including:
- Acupuncture
- Fees paid to chiropractors
- Fees paid to a Christian Scientist practitioner
- Treatment for alcohol or drug addiction, including meals and lodging—plus, transportation to and from Alcoholics Anonymous meetings in your community
- Fertility treatment such as in vitro fertilization and pregnancy test kits
- Lactation supplies like breast pumps
- Sterilization procedures like vasectomy
- Home improvements including modifications to bathrooms, doors, kitchen cabinets, entrances, and stairs to accommodate a disability
- Cost of removing lead-based paint from your home
- Owning a guide dog or other service animal
- Participation in a program to stop smoking
- A weight-loss program, when recommended by a doctor to treat a medical condition
- Special education for a child with learning disabilities, recommended by a doctor
This is not a complete list of qualified medical and dental expenses, so be sure to refer to Publication 502opens PDF file , Medical and Dental Expenses for more information.
Are Health Insurance Premiums Tax Deductible?
You can also deduct insurance premiums that cover medical and dental care—unless your employer paid them for you. That’s because the cost of employer-paid premiums are typically excluded from your gross income, making them a tax-free benefit to begin with. So deducting them on Schedule A would be double-dipping, which is definitely not allowed by the IRS.
Additionally, medical expenses paid using a health savings account don’t qualify for a tax deduction because funds in the account were never subject to tax.
Medical Costs That Are Not Tax Deductible
While there are hundreds of expenses that qualify for the medical and dental tax deduction—don’t get carried away! Here’s a list of expenses that are not tax deductible:
- Over-the-counter medicines that don’t require a prescription
- Controlled substances like marijuana (even if legalized by state law)
- Personal use items like toothpaste, tissues, or soap
- Elective cosmetic surgery or hair transplants
- Teeth whitening
- Gym memberships or swimming lessons
- Vitamins or nutritional supplements, unless recommended by a doctor to treat a diagnosed medical condition
- Funeral or burial expenses
When to Deduct Medical Expenses
You can deduct medical and dental expenses in the year you paid for them, regardless of when the services were provided. So if you received medical treatment in 2010, but didn’t pay for it until 2011, you can only deduct the expenses in 2011.
If you neglected to claim a deductible medical expense, you can file an amended tax return on Form 1040Xopens PDF file for the year you missed the tax break. You generally have 3 years from the date the original return was filed or 2 years from the date you paid tax, whichever is later, to correct a botched tax return.
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.
