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What Medical Expenses Can I Claim On Tax
Unexpected medical expenses throughout the year can be a huge burden on your finances. Fortunately, during tax season, you may be able to find some financial relief through the medical expense tax deduction. At the federal level, you may be able to deduct some of your qualifying medical expenses as long as you meet the IRS’s requirements.
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Keep your receipts if you or your dependents spend time in the hospital or have costly medical expenses during the year. Tax deductions can lower your total tax liability and reduce your taxable income. If you are interested in claiming medical expenses on your taxes, this article is for you. We cover what the medical expense deduction is, what the qualifying medical expenses are, what medical expenses are not tax deductible and how to claim medical expenses on your taxes.
The medical expense deduction allows taxpayers to deduct unreimbursed, qualified medical expenses. This deduction lowers your taxable income if you spend more than 7.5% of your adjusted gross income (AGI) on your medical expenses during the tax year, including prescriptions, doctor’s fees and medical treatment. For example, if you have an AGI of $50,000, any health care expenses above $3,750 may be deductible. So if you have $5,000 in medical bills, $1,250 of your bills can be tax deductible.
The IRS expects you to be honest when you claim the medical expense deduction, so keep your receipts as proof of your expenses. In addition, some states offer a deduction for medical expenses and may allow a lower threshold for which you may qualify more easily.
You must pay for these medical expenses in the year for which you claim the tax deduction, regardless of when you received the health care services. For example, if you receive treatment in December 2022 but pay your bill in January 2023, you will claim the medical expense deduction on your 2023 tax return.
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If you pay by check, your payment date is the date you mailed or delivered the check. If you pay by phone or online, your payment date is included on the statement that shows when you made your payment. If youare paying with a credit card, your payment date is the date the charge was made instead of the day you paid your credit card bill.
A cost for medical care is a payment for a diagnosis, treatment, cure, prevention or mitigation of a disease or a payment for treatment that affects any function or structure of the body. Qualified medical expenses that you may be able to deduct on your taxes include payments for:
If you are self-employed, you may qualify for the self-employed health insurance tax deduction if you have a net annual profit. Rather than an itemized deduction, this is an adjustment to your income for premiums you’ve paid on a health insurance policy, including qualifying long-term insurance policies for yourself, your dependents, or your spouse. If you choose not to claim all of your premiums paid, you can include the remaining medical expenses on Schedule A (Form 1040) through an itemized deduction.
Along with your own medical expenses, you may be able to deduct medical expenses for your spouse or qualifying dependent. To be considered a qualifying dependent, you must meet the following criteria:
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While children are often claimed as dependents, other family members may be qualifying dependents. For example, if your niece lived with you for nine months while she had no income and provided you with all her support, you may be able to claim her as a dependent on your tax return, as long as you meet the above criteria.
To claim your spouse’s medical expenses, you and your spouse must have been married when you paid the expenses or when the service was received. Your spouse must also be a US citizen or resident for the duration of the tax year.
If you arelegally separated or divorced, you may be able to deduct qualifying medical bills you paid for your child, even if your ex-spouse claims your child as a dependent. You can only claim the part of the medical bill that you paid, and your spouse can claim the part of the costs that they paid. If you and multiple people cover medical expenses with a multiple support agreement, the person claiming the dependent is the only one who can claim this deduction.
You can also deduct medical expenses for a deceased taxpayer. The same rule applies that you must claim the deduction for medical expenses for the year you paid those expenses, regardless of the year the taxpayer died.
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You also cannot deduct reimbursed expenses, such as medical bills that your insurance covers. For example, if your prescription medication costs $100, your insurance covers $40, and you pay the remaining $60, you can deduct the $60 that you paid out-of-pocket with the medical expenses deduction.
To determine whether your medical expenses may be worth claiming on your taxes, consider whether you file separately or jointly. Sometimes you can get a larger deduction for medical expenses if you are married and filing separately. However, this can be dangerous if you lose other tax benefits as a result. However, filing jointly may mean that you cannot deduct as much as one of your medical expenses because of your combined adjusted gross income (AGI).
For example, let’s say you pay $5,000 in medical bills per year, and you and your spouse file together with a total AGI of $75,000. Only the amount of medical expenses that exceed 7.5 % is deductible. In this case, only expenses over $5,625 are deductible, which means you can’t deduct any of your medical expenses.
However, if you file separately and your AGI is $35,000 while your spouse’s is $40,000, you can deduct your qualifying medical expenses that are greater than 7.5% of your $35,000 AGI . In this case, you can deduct the part that is greater than $ 2, 625. This means that filing separately would give you a $ 2, 375 tax deduction.
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Instructions for how to claim the medical expense deduction are included on your tax forms when you file your return. In general, here are steps you should take to prepare for these expenses.
When it comes to taxes, keeping good records is essential. Keep your medical bills and receipts. If there are gaps in your recordkeeping, ask for your records from your caregivers or your pharmacy. Many taxpayers who claim this deduction are ill or have chronic medical problems. If this is your situation, keeping track of all healthcare expenses is crucial.
Next, instead of opting for the standard deduction on your tax return, you will have to itemize to claim the medical expense deduction. Although itemizing may mean you spend more time preparing your taxes, it can save you money if taking the standard deduction is less than itemizing. On the other hand, if taking the standard deduction will be greater than itemizing your deductions, you may be able to save some time and select the standard deduction instead.
As of 2022, the standard deduction for a single taxpayer or married couples filing separately is $12,950. For married couples filing jointly, the standard deduction is currently $25,900. The standard deduction for heads of household is $19,400.
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Finally, you will use Schedule A to calculate and claim your deduction for medical expenses. Follow the steps below to itemize your deductions on Schedule A:
For example, if you are a single taxpayer, your itemization must exceed the standard deduction of $12,950. If not, you must claim the standard deduction instead. As a rule of thumb, the medical expense deduction is most beneficial to taxpayers whose medical expenses are high relative to their income. If you believe you may qualify, do the calculations yourself or use online tax software that can do the calculations for you.
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