Medical Expenses Deduction

Medical Expenses Tax Law Expiration

There is a medical expenses tax deduction advantage available for those 65 years old or over that is set to expire at the end of this year.

For 2013 through 2016, people age 65 and over are able to deduct the amount of their medical expenses that is over 7.5% of their Adjusted Gross Income (AGI). Next year the hurdle returns to 10%.

It may be beneficial from a tax perspective to have any deductible medical procedures done before the end of 2016 if you or your spouse are 65 or over.

The deductible medical expenses hurdle of 10% of AGI is a big hurdle. One must spend more than ten percent of their income in one year to start deducting medical expenses. The first ten percent is not deductible, it is only the amount above ten percent. A family that files jointly and earns (has an adjusted gross income of) $60,000 will have to spend over $6,000 on qualified medical expenses before anything can be written off.

Let’s look at an example to help illustrate the benefit to taking advantage of the current 7.5% hurdle before the end of 2016.

A taxpayer 65 or over who earns $60,000 must spend above $4,500 in deductible medical expenses to begin tax deductions. The same taxpayer who is 65 or over and waits until 2017 to have a procedure will only be able to deduct above the $6,000 mark. This means there is a tax deduction benefit of $1,500 in this case. Again, the deadline is December 31, 2016. Next we will look at what qualifies for a deductible medical expense.

 

Doctors coat closeupDeductible Medical Expenses

There is a long list of deductible expenses provided by the IRS at:
https://www.irs.gov/publications/p502/index.html

If you want to work through an IRS calculator, here is the link:
https://www.irs.gov/uac/can-i-deduct-my-medical-and-dental-expenses

There are some items that are not allowed deductions, and frankly it should be obvious they are not allowed. Items such as teeth whitening, swimming and dance lessons (how this could be considered a medical procedure I don’t understand), veterinary bills, health club dues, hair removal, hair implants, and lots of others that are not necessary medical expenses.

The essential aspect of a deductible medical expense is:

“Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness.” They do not include expenses that are merely beneficial to general health.

Some of the major categories of allowable expenses are:

  • Insulin and prescription drugs
  • Fees to doctors and dentists
  • In-patient hospital or nursing-home care for a medical reason
  • In-patient and acupuncture treatment for alcohol addiction, drug addiction, and smoking cessation programs
  • Medical weight-loss programs
  • Admission and transportation to medical conference relating to chronic disease you or your dependent has
  • Payments for false teeth, reading and prescription glasses, hearing aids, crutches, wheelchairs, and guide dogs for the blind or deaf
  • Payments for transportation to receive qualified medical care
  • Insurance premiums for medical care and long term care.

 

For comments or questions, reach out on twitter: @iammrmarshall

 

Medical Expenses Deduction
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