Individual taxpayers may be able to claim medical expense deductions on their tax returns. However, the rules can be challenging, and it can be difficult to qualify. Here are six points to keep in mind:
1. You must itemize to claim this deduction.
To benefit from itemizing, your total itemized deductions must exceed your standard deduction. Besides medical expenses, itemized deductions may include property taxes, state and local income tax, mortgage interest, charitable donations, etc., subject to various rules and limits.
With the increased standard deduction that’s been available in recent years, far fewer taxpayers are benefitting from itemizing. For 2021, the standard deduction is $25,100 for married couples filing jointly, $18,800 for heads of households and $12,550 for singles.
2. Your expenses must be fairly significant.
The medical expense deduction can be claimed only to the extent your eligible costs exceed 7.5% of your adjusted gross income (AGI). Remember, expenses paid via tax-advantaged accounts (such as Flexible Spending Accounts or Health Savings Accounts) or reimbursable by insurance aren’t deductible.
If you’ll benefit from itemizing deductions this year and your year-to-date medical expenses are close to exceeding the 7.5% of AGI “floor,” moving or “bunching” nonurgent medical procedures and other controllable expenses into this year may allow you to exceed the 7.5% floor and benefit from the medical expense deduction. If your expenses already exceed the floor, bunching can increase your deduction.
3. Health insurance premiums may help.
This can total thousands of dollars a year. Even if your employer provides health coverage, you can deduct the portion of the premiums that you pay, unless you paid them pre-tax. (Check with your employer if you’re not sure).
Long-term care insurance premiums are also included as medical expenses, subject to limits based on age.
4. Count transportation expenses too.
The cost of getting to and from medical treatments counts as a medical expense. This includes taxi fares, public transportation or using your own car.
Car costs can be calculated at 16 cents a mile for miles driven in 2021, plus tolls and parking. Alternatively, you can deduct certain actual costs (such as for gas and oil) that directly relate to your medical transportation.
5. Controllable costs are key.
These include the costs of glasses, hearing aids, dental work, mental health counseling and other ongoing expenses in connection with medical needs. Purely cosmetic expenses generally don’t qualify.
Prescription drugs (including insulin) qualify, but over-the-counter medications and vitamins don’t. Neither do amounts paid for treatments that are illegal under federal law (such as medical marijuana), even if state law permits them. The services of therapists and nurses can qualify if they relate to medical conditions and aren’t for general health.
6. Don’t overlook smoking-cessation and weight-loss programs.
Amounts paid for participating in smoking-cessation programs and for prescribed drugs designed to alleviate nicotine withdrawal are deductible. However, nonprescription nicotine gum and patches aren’t.
A weight-loss program is deductible if undertaken as treatment for a disease diagnosed by a physician. Deductible expenses include fees paid to join a program and attend periodic meetings. The cost of diet food isn’t deductible.