How to Deduct Medical Expenses on Your U.S. Tax Return

Introduction

Medical expenses can be a significant financial burden, but the U.S. tax system allows eligible taxpayers to deduct certain medical and dental expenses on their federal tax return. These deductions can reduce taxable income and lower overall tax liability. However, not all medical expenses are deductible, and specific rules apply regarding eligibility, deduction limits, and documentation.

This article provides a comprehensive guide on how taxpayers can deduct medical expenses on their U.S. tax return, including eligibility criteria, qualifying expenses, and deduction limitations under the IRS rules.

1. Who Can Deduct Medical Expenses?

• Medical expense deductions are available to taxpayers who itemize deductions on Schedule A (Form 1040) rather than taking the standard deduction.
• The total medical expenses must exceed 7.5% of adjusted gross income (AGI) to qualify for a deduction.
• Only out-of-pocket medical expenses paid for the taxpayer, their spouse, and dependents can be deducted.

2. What Medical Expenses Are Deductible?

The IRS allows deductions for a range of qualifying medical and dental expenses, including:

• Payments to doctors, dentists, surgeons, and mental health professionals.
• Hospital and nursing home care related to medical treatment.
• Prescription medications and certain over-the-counter drugs if prescribed by a doctor.
• Medical equipment and supplies, such as wheelchairs, crutches, and hearing aids.
• Long-term care services and insurance premiums for qualified long-term care insurance policies.
• Travel expenses, including mileage, lodging, and transportation costs related to medical treatment.

3. Non-Deductible Medical Expenses

Certain expenses are not deductible, including:

• Over-the-counter medicines without a prescription.
• Cosmetic procedures (unless medically necessary).
• Health club memberships and general wellness expenses.
• Non-prescription vitamins and supplements.

4. How to Claim the Medical Expense Deduction

• Itemizing Deductions: Taxpayers must file Schedule A (Form 1040) and itemize deductions instead of taking the standard deduction.
• Calculating the Deduction: Only the portion of total medical expenses exceeding 7.5% of AGI is deductible.
• Maintaining Records: Keep receipts, invoices, and medical records to support the deduction in case of an IRS audit.

5. Tax-Saving Strategies for Medical Expenses

• Flexible Spending Accounts (FSA): Contributions to an FSA can be used for medical expenses tax-free.
• Health Savings Accounts (HSA): HSA contributions allow tax-free payments for qualifying medical expenses.
• Bunching Expenses: Taxpayers expecting high medical costs in a given year can group expenses to exceed the 7.5% AGI threshold.

Conclusion

Understanding how to deduct medical expenses can help taxpayers reduce taxable income and save on taxes. To maximize benefits, taxpayers should carefully track medical expenses, determine whether itemizing is beneficial, and ensure they meet the 7.5% AGI threshold. 

Tax Partners can provide expert guidance on medical expense deductions, tax planning, and optimizing deductions to reduce overall tax liability.

This article is written for educational purposes.

Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.

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