- Medical expenses may be tax-deductible but only if you itemize.Jupiterimages/Photos.com/Getty Images
Medical deductions are reported on Schedule A of Form 1040. You can claim this tax deduction if your total medical expenses exceed 7.5 percent of your adjusted gross income. With an income of $50,000 and total medical expenses of $4,150, your deduction is $400.
The deduction for out-of-pocket medical expenses often confuses taxpayers because the 7.5 percent amount is not the deduction. That percentage is the exclusion amount. Using the above example, any expenses over the $3,750 exclusion amount becomes your deduction for medical expenses. It is easier to understand if you group your medical expenses into specific categories. - Included in this group would be payments and co-pays made by you to a medical doctor, nurse practitioner, dentist, chiropractor, optometrist, therapist (physical and psychological), ophthalmologist, specialist and provider of second opinion evaluations.
Use an envelope to store receipts for medical payments beginning January 1 and ending December 31. In addition, always enter the transaction in your check register. Use both of these sources at tax time to complete a list of your co-pays, the recipient and the destination address of your appointment. The reason for this record will become clear later. - Anything paid directly from your wages/income or with your own funds to a health insurance provider is deductible. This amount usually represents the largest portion of medical expense paid. A large number of taxpayers are unaware of this deduction.
Keep a hard copy of all payments to health insurance providers. If the premium -- or a portion of it -- is deducted from your pay, the amount will appear on your W-2 or final pay stub for the tax year. When you pay your own health insurance premiums, pay with a check and enter the payment amount into your check register. - Prescriptions written by medical professionals to treat either a chronic or an acute condition are deductible as medical expenses. Any medical order for prescription-strength vitamins or supplements is a deduction. Over-the-counter (OTC) medications are not deductible, however.
Keep receipts, pay by check and make transaction entries in your check register notating these payments as medical expenses. Recipient name and address are very important. Most pharmacies will provide you with a year-end summary of your tax-deductible medication purchases upon request. - An assistive device is anything that facilitates mobility for those wishing to remain independent but who endure disabling or crippling medical conditions. In addition to prescription eyeglasses and hearing aids, you can deduct power chairs, scooters, braces (arm/leg/wrist), wheelchairs, special shoes and other similar devices that require approval by a medical doctor, dentist or other health care provider.
Be sure to request and keep copies of medical or dental letters confirming your need for assistive devices. Also, get a receipt from the equipment supplier. If you make a co-payment, use a check and make the entry in your check register. - All medical travel is deductible, although many taxpayers overlook this deduction. To calculate your mileage deduction, consider your home address and your destination addresses. Access MapQuest online, enter the two addresses and determine your one-way mileage. Never estimate mileage. Include your mileage to medical appointments, pharmacies and device providers. Do this for your initial visit to each destination. Multiply your mileage by two (round trip) and then by the number of trips to each destination. Add resulting miles together for your medical mileage total.
- Total medical expense deductions must be greater than 7.5 percent of your adjusted gross income. You can deduct any medical expenses in excess of that amount. Taxpayers with an AGI of $50,000 or more could still have deductible medical expenses. Those expenses typically add up slowly throughout the year.
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