Kara Sears
Medical expenses can be deducted from your taxes, but there are a few things to keep in mind. Firstly, you can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). Secondly, the expenses must be related to the prevention or treatment of a specific medical condition and not for general health purposes. Thirdly, you can deduct expenses for yourself, your spouse, and your dependents, but not for any other individuals. Finally, certain types of expenses are not deductible, such as funeral expenses, over-the-counter medicines, and cosmetic treatments. By understanding these key points, taxpayers can effectively utilize the medical expense deduction to lower their tax bills.
| Characteristics | Values |
|---|---|
| Deduction criteria | Medical expenses must exceed 7.5% of adjusted gross income (AGI) |
| Deduction type | Itemized deductions |
| Eligible expenses | Medical and dental expenses, unreimbursed preventative care, treatment, surgeries, vision care, prescription medications, appliances, travel for qualified medical care, insurance premiums for medical care, transportation costs |
| Ineligible expenses | Funeral expenses, over-the-counter medicines, controlled substances, toiletries, cosmetic treatments, vitamins and supplements, gym memberships |
| Self-employed considerations | Self-employed individuals may be eligible for a self-employed health insurance deduction for premiums paid out of pocket |
| Disability accommodations | Costs for disability accommodations at home may be deductible |
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What You'll Learn
Self-employed health insurance deduction
If you're self-employed, you may be eligible to deduct premiums that you pay for medical, dental, and qualifying long-term care insurance coverage for yourself, your spouse, and your dependents. This is known as the self-employed health insurance deduction. This deduction is an adjustment to income, rather than an itemized deduction, for premiums paid on a health insurance policy covering medical care.
The policy can also cover your child who is under the age of 27 at the end of the year, even if the child is not your dependent. If you don't claim 100% of your paid premiums, you can include the remainder with your other medical expenses as an itemized deduction on Schedule A (Form 1040).
To be eligible for the self-employed health insurance deduction, you must meet certain Internal Revenue Service (IRS) criteria. Firstly, you must have a qualifying insurance plan. Eligible health insurance includes medical insurance, qualifying long-term care coverage, and all Medicare premiums (Parts A, B, C, and D). Secondly, you must be an eligible self-employed individual. You are considered eligible if you have a net profit reported on Schedule C or F. You are also eligible if you are a general partner, a limited partner receiving guaranteed payments, or a shareholder owning more than 2% of the outstanding stock of an S corporation with wages from the corporation reported on Form W-2.
It is important to note that if you have access to an employer-sponsored subsidized health insurance plan, you are not eligible for the self-employed health insurance deduction. This applies if either you or your spouse has access to such a plan through their employer. The self-employed health insurance deduction is applied on a month-to-month basis, so you would only be disqualified from claiming the deduction for the months that you had employer plan coverage.
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Medical expenses for dependents
If you itemize your deductions for a taxable year on Schedule A (Form 1040), you may be able to deduct the medical and dental expenses you paid for yourself, your spouse, and your dependents. This applies only to expenses not compensated by insurance or otherwise, regardless of whether you receive the reimbursement directly or payment is made on your behalf to the doctor, hospital, or other medical provider. The deduction applies to expenses that exceed 7.5% of your adjusted gross income for the year.
The IRS allows taxpayers to deduct their qualified unreimbursed medical care expenses, including preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses paid to travel for qualified medical care.
If you are self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction. This is an adjustment to income for premiums paid on a health insurance policy covering medical care, including a qualified long-term care insurance policy for yourself, your spouse, and dependents.
There are exceptions that allow you to claim medical expenses for someone who is not your dependent. For example, if you are divorced or separated, you can claim an exception for a child who is treated as a dependent of both parents. Each parent can claim the medical expenses they paid for the child if the child was in their custody for more than half the year and received over half of their support from their parents during the year.
If you paid medical expenses for your deceased spouse or dependent, you can include them as medical expenses on your Schedule A (Form 1040) in the year paid, whether they are paid before or after the decedent's death.
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Transportation costs
Transportation expenses may only qualify for tax deductions if they are directly related to the primary business for which an individual works. For example, if a traveler works in the same business or trade at one or more regular work locations that are away from home, it is considered a transportation expense. If a traveler has no set workplace but mostly works in the same metropolitan area they live in, they may claim a travel expense if they travel to a worksite outside of their metro area.
The IRS provides guidelines for transportation expenses, deductibility, depreciation, conditions, exceptions, reimbursement rates, and more in Publication 463. The publication sets the per-mile reimbursement rate for operating your personal car for business. Travelers who use their vehicles for work can claim 58.5 cents per mile for the 2022 tax year, increasing to 62.5 cents for the remaining six months. That's up from 56 cents in 2021. The IRS-determined rate treated as depreciation for the business standard mileage is 26 cents as of January 1, 2021.
Commuting costs are not considered a deductible transportation expense. Costs of driving a car from home to work and back again are personal commuting expenses. This is also true for fares paid to ride any mode of transportation to and from work. However, you can deduct daily transport expenses when you travel between your home and a temporary work location. A temporary work location is one that's expected to last for one year or less and is usually outside the metropolitan area where you live and normally work. You can deduct the expenses for going between your home and a temporary work location if you have one or more regular work locations away from your home, and the work is in the same trade or business as your permanent work, regardless of the distance. If your home is your main place of business, you can deduct transportation expenses you incur when going from your home to another work location in the same trade or business.
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Medical expenses for those with disabilities
The IRS allows taxpayers to deduct their qualified unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income. This includes unreimbursed payments for preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses paid for transportation to and from medical care.
For those with disabilities, there are additional deductions that can be claimed. According to IRS Publication 502, you can include in medical expenses the cost of keeping a person who is intellectually and developmentally disabled in a special home, not the home of a relative, on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital to community living. You can also include in medical expenses amounts paid for admission and transportation to a medical conference relating to a chronic illness of yourself, your spouse, or your dependent, as long as the costs are primarily for and essential to necessary medical care. Amounts paid for false teeth, reading or prescription eyeglasses, contact lenses, hearing aids, a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities, crutches, and wheelchairs are also deductible.
If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Any medical expenses paid by others who joined you in the agreement can't be included as medical expenses by anyone. However, you can include the entire unreimbursed amount you paid for medical expenses.
If you have a physical or mental disability that limits your employment, refer to Publication 529, Miscellaneous Deductions.
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Non-deductible medical expenses
The following expenses are non-deductible:
- Funeral expenses
- Over-the-counter medicines
- Controlled substances
- Toothpaste, toiletries and cosmetics
- Nicotine gum and patches that don't require a prescription
- Most cosmetic surgery and treatment (e.g., electrolysis, hair transplants, teeth whitening)
- Premiums treated as paid by your employer, such as employer-sponsored premiums paid under a premium conversion plan or cafeteria plan
- Expenses for general health benefits, such as vitamins, a vacation, or health club dues
- Nonprescription drugs (except insulin)
- Medical expenses paid in a different year
- Medical expenses paid using money from a flexible spending account or health savings account
- Expenses for meals and lodging while attending a medical conference
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Frequently asked questions
Yes, if you're self-employed and have a net profit for the year, you may be eligible for the self-employed health insurance deduction.
You can deduct unreimbursed expenses for preventative care, treatment, surgeries, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth and hearing aids, and expenses that you pay to travel for qualified medical care.
You cannot deduct expenses that were reimbursed by an insurance plan, a flexible spending account, a health savings account, or another tax-advantaged savings account. You also cannot deduct expenses that benefit general health, like nutritional supplements, vitamins, funeral expenses, over-the-counter medicines, controlled substances, toothpaste, toiletries, cosmetics, nicotine gum and patches that don't require a prescription, and most cosmetic surgery and treatment.
The deduction value for medical expenses varies because the amount changes based on your income. You can deduct your total qualified unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income.
To deduct medical expenses, you must itemize your deductions on IRS Schedule A instead of taking the Standard Deduction.
