Are medical bills tax-deductible? Is dental work tax-deductible? The answer to both questions is yes…sometimes. Before you take any medical expense deduction, there are some fine points to keep in mind, such as when you can make such deductions and which expenses you are and are not allowed to deduct.
For guidance, Bottom Line Personal turned to Maryann Reyes, CPA, principal and tax specialist at WithumSmith+Brown…
Whose expenses can be deducted?
Qualifying medical expenses may be deducted if they were for the care of the taxpayer, the taxpayer’s spouse or any of the taxpayer’s dependents, including dependent parents. You may begin deducting these expenses once they exceed 7.5% of your adjusted gross income (AGI) for the year.
Example #1: In one year, your AGI is $100,000 and the total medical expenses for yourself and all of your dependents add up to $7,499. You may not deduct any medical expenses because the total does not exceed the 7.5% threshold ($7,500).
Example #2: In another year, your AGI is $100,000 and the total medical expenses for yourself and all of your dependents add up to $8,500. Because that amount exceeds 7.5% of your AGI (that is, $7,500), you may make a deduction—but the deduction is not for the full $8,500…it is only for the $1,000 that you paid over the threshold.
Reminder: You may deduct medical expenses only if you itemize your deductions on Form 1040 or 1040-SR. The deduction is limited to out-of-pocket expenses, so no deduction can be claimed if they are covered by insurance or reimbursed through a health flexible spending account (FSA) or health savings account (HSA).
What can I deduct?
You can deduct the cost of insurance premiums, deductibles and copays for treatments, services, products and medications that are prescribed or recommended by licensed medical professionals who have determined that they are medically necessary. The list of qualifying expenses is surprisingly robust. In addition to obvious things such as cancer treatments and gallbladder surgery, you may deduct the following…
- Transportation and hotel costs (but not the food) incurred in traveling to undergo medical care
- Acupuncture to treat a diagnosed condition
- Wigs for chemotherapy patients
- Physical and occupational therapy
- Orthodontics
- Dentures
- Medicare B and D payments
- Ambulance rides
- Long-term-care costs
- Testing and screening for medical conditions
- Chiropractic and osteopathic doctors
- Mental health care
- Prescription weight-loss programs
- Prescription smoking-cessation programs
- Prescription drug and alcohol rehabilitation programs
- Fertility treatments
- Eyeglasses and contact lenses
- Prescription birth control
- Hearing aids
- Condoms
People diagnosed with celiac disease or gluten allergies even may deduct the difference in the prices they pay for gluten-free foods compared to the prices of ordinary items. Example: If a loaf of regular bread costs $4 and a loaf of gluten-free costs $7, you may deduct the $3 difference. This, of course, requires careful attention and record-keeping, and you must have a diagnosis in writing and a written prescription that gluten-free food is necessary to treat the condition.
What can’t I deduct?
The list of non-qualifying expenses is much shorter. You may not deduct expenses for cosmetic procedures or products not related to medical conditions. Examples: Hair transplants, teeth whitening, facelifts and purely cosmetic breast augmentation are not deductible. You may not deduct any over-the-counter products that are not prescribed, such as headache medicines and antacids. Over-the-counter vitamins and supplements also are excluded, as are diet or health foods that are not part of a prescribed weight-loss program. Many people assume that gym memberships are deductible, since they keep you healthy, but they are not (unless prescribed by a doctor to address a medical condition such as obesity).
What records do I need to keep?
If you plan to itemize your deductions and claim medical expenses, keep records throughout the year. If you’re the kind of person who keeps spreadsheets, great. But if not, just jot down entries in a notebook when you pay for things. And retain all proof-of-payment documents.
You’ll need to show all those receipts to your tax professional who will retain copies but will not submit them when your taxes are filed. If your deductions seem reasonable and there are no other red flags in your tax return, it’s highly unlikely that you’ll be challenged. In the event that you are audited by the IRS, you will need to prove that every itemized expense was medically necessary and paid out of your pocket. That’s why it’s a good idea to also hang onto any records from your health-care providers that show diagnosed medical conditions. If you don’t have these and are audited, you may request the records from your health-care providers.
