One might spend a lot of income on medical bills, especially when unplanned emergencies arise and the insurance cannot cover it all. The bright side is that one can have some relief via provisions from the Internal Revenue Service. As a result, some of the expenses can be tax-deductible partially.
Before one can enjoy what the tax deduction can offer, one needs to be aware of what can be deducted as medical and dental expenses and how to claim the deduction.
Dental and Medical Insurance Premiums
All insurance premiums that were provided to cater to policies covering medical care can be deducted. With Qualified medical care, the policy makes payment available for the following treatment:
Insulin and prescription drugs
Dental care
X-rays, cost of surgery, and hospitalization
Long term care
You cannot include payment for the premium tax credit. A taxpayer that qualifies for Premium tax credit will need to complete Schedule A. It is essential not to have any insurance premium you got from a health insurance program sponsored by your employer. This, however, does not hold if the value is available on Form W2.
Schedule A's deductible amount needs to be brought down by any insurance deduction from self-employed programs that you will take on Form 1040.
Medical Expense Deduction Value
Uncle Sam gave all taxpayers the liberty to deduct the entire expense amount of unreimbursed medical care that qualifies in the year for any amount that rises above 7.5% of the (AGI) adjusted gross income.
You get the value of your adjusted gross income when you remove any income adjustment (like IRA contributions and interest on a student loan) from the value of your income that can be taxed.
For instance, Madison has an AGI of $60,000 and $6700 of medical expenses. Madison will have to multiply $60,000 by 7.5%. With this, you can find the expenses rising above $4,500 can be deducted. As a result, Madison’s medical expenses deduction will be $6700 - $4,500 giving $2,200.
Medical Expenses that can be deducted
Uncle Sam allows taxpayers to deduct treatment, preventative care, dental care, vision care, and surgeries as medical expenses that qualify. Also, visits to psychiatrists and psychologists can be deducted. One can also remove prescription medications like contacts, glasses, hearing aids, etc.
You can also deduct any expenses that serve your travel costs for medical care like bus fares, parking tickets, and your vehicle's mileage.
What you cannot Deduct?
If you are reimbursed for any medical expenses by your employer or your insurance company, you cannot deduct such. However, Uncle Sam does not allow a deduction for cosmetic procedures if you buy a non-prescription drug like insulin or several purchases for general health like multivitamins, diet food, nicotine products that you paid for in another year.
Claiming the Deduction for Medical Expenses
It is essential to itemize deductions if you want to claim the deductions for your medical expenses. When you itemize, you will have to avoid the standard deduction route. Also, weigh both routes and claim the deductions for medical expenses, provided that the deductions you itemize are more than the standard deduction.
Form 1040 from the IRS and Schedule A must be filed for people who chose the itemization route.
Schedule A will have the entire medical expenses paid in the year – line 1, while the adjusted gross income will be on line 2. You will get the AGI on form 1040
On line 3, input 7.5% of your AGI
The difference between the expenses you have alongside 7.5% of your AGI will go to line 4.
You will subtract what you got and inputted on Line 4 from your AGI. This will bring down your taxable income for the year.
It is not recommended to take the itemization route if the amount alongside other deductions you itemize is not up to the standard deduction value.
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