Tips on maximizing your medical expense deduction
Medical costs seem to increase every year. There is a way to get Uncle Sam to pay for some of the doctor bills, but you need to make sure you know and follow the rules.
The IRS lets you deduct medical costs on your tax return as long as they are more than 10% of your adjusted gross income. (Taxpayers who are 65 or older can still use the previous 7.5% threshold to claim itemized medical expenses through the 2016 tax year.) The percentage may seem unattainable at first glance, but with a little tax triage you might just meet it.
Don’t overlook the medical expenses of everyone listed on your tax return. Medical and dental bills for you, your spouse and your dependents count toward the allowable deduction limit. You might be able to count some medical expenses you paid for a parent, even if Mom or Dad isn’t considered your dependent for exemption purposes.
And while it’s not something we want to think about, don’t forget about medical bills you paid for a deceased dependent in the year they were paid, whether before or after the person died.
Once you’re confident you know just whose costs are covered, make sure you don’t miss one.
Often-overlooked medical deductions:
- Travel expenses to and from medical treatments. The IRS evaluates the standard cents-per-mile allowance each year. For 2015 taxes, the medical travel rate is 23 cents per mile. For 2016, low inflation pushes it down to 19 cents per mile.
- Insurance payments from already-taxed income. This includes the cost of long-term care insurance, up to certain limits based on your age.
- Uninsured medical treatments, such as an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs.
- Costs of alcohol- or drug-abuse treatments can be counted on your Schedule A.
- Laser vision corrective surgery is a tax-allowable procedure.
- Medically necessary costs prescribed by a physician. That means if your doctor told you to add a humidifier to your home’s heating and air-conditioning system to relieve your chronic breathing problems, the device — and additional electricity costs to operate it — could be at least partially deductible.
- Some medical conference costs. You can count admission and transportation expenses to the conference if it concerns a chronic illness suffered by you, your spouse or a dependent. Meals and lodging costs while at the seminar, however, are not deductible.
Health-conscious taxpayers also have a friend in the IRS. Weight-loss programs, in some instances, now might count as a deductible medical expense, joining the stop-smoking programs the agency approved earlier.
But don’t try to cheat on your calorie intake or the IRS. The diet program must be medically necessary. Acceptable situations include, for example, when a doctor recommends the regimen to reduce the health risks of obesity or hypertension.
And don’t try to write off that expensive bottled water you have delivered each week. Sure, H2O is critical to good health, but the tax collector thinks your tap water will suffice.
Special medical needs
If you have special needs, however, there are some costs you can write off. Take into account the cost of a wheelchair, crutches, equipment that enables a deaf person to use the telephone or devices that provide television closed-captioning. Don’t forget a Seeing Eye dog or canine for the hearing-impaired, or the costs to retrofit your car with special hand controls or space to hold a wheelchair.
Some home remodeling also might be just the prescription for a tax break, as long as you follow your doctor’s orders and IRS rules. If you need, for example, to add a chairlift to get up and down the stairs because of a medical condition, this is considered a legitimate expense.
Changes to your home to make it more accessible for a handicapped resident also are allowable.
Elevators, however, generally aren’t deductible. The IRS considers this a structural change that could increase the value of your house and, therefore, doesn’t allow it as a medical deduction.
In calculating residential remodeling as a medical deduction, keep in mind that you likely won’t be able to write off the full costs on your tax return. If the improvement increases the value of your property, that amount is subtracted from the project’s cost and the difference counts as a medical expense. The value added to your home isn’t lost tax-wise. It will increase its basis so that when you do sell, it will help you in reducing any possible taxes owed on that profit.
Medical, but not tax-deductible
Uncle Sam does set some additional medical deduction limits. As a general rule, he doesn’t care how we look.
Cosmetic surgery, health-club dues or costs of a weight-loss program that is not medically necessary aren’t deductible.
Neither are hair transplant operations or, at the other extreme, electrolysis treatments.
Although elective surgeries are not tax-deductible, you can finance cosmetic or non-medical surgeries with a personal loan.
RATE SEARCH: Check medical loan rates today.
And household help to care for you or an ailing dependent isn’t deductible either, even if it’s recommended by your doctor. Such assistance, however, might help you qualify for the dependent care credit.
For a complete list of what the IRS will and won’t allow you to count toward your medical deductions, check out Publication 502. You might find a few things there that apply to you — maybe just enough to get you over that 10% deduction hurdle.