Medical bills can eat up a substantial portion of a family’s budget. In fact, nearly a quarter of all Americans are having trouble paying for their medical costs. Often it is a hospital stay, with daily costs exceeding $5,000, that can spiral financial budgets into a tailspin.
Fortunately for some, the Internal Revenue Service does offer some assistance in the form of tax breaks. Depending on your income and the medical costs you have accumulated, you may be able to offset some of your out of pocket expenses in the way of tax deductions.
What Is Deductible?
The IRS has identified certain products and services that may qualify for a deduction. A few of the eligible items include:
- False teeth
- Hearing aids
- Psychiatrist visits
- Psychologist visits
- Prescription medications
- Medically necessary surgeries
- Medically necessary treatments
Travel costs to and from medical visits may also be deductible, including car mileage, train or bus fare, and parking expenses. A more comprehensive list can be found on the IRS website.
What Is Not Deductible?
While the IRS provides a robust list of deductible products and services, there are still several items that are not eligible such as:
- General health products
- Insurance reimbursed expenses
- Employer reimbursed expenses
- Cosmetic surgeries or treatments
- Nonprescription medications (except insulin)
In addition to the above list, items normally eligible for a deductible must be paid for in the same tax year you are filing for; otherwise, they become ineligible.
Who Is Eligible?
Taxpayer eligibility depends on much of your annual income was spent on medical expense. For the 2019 tax year, eligible medical expenses that exceed 7.5% of your adjusted gross income (AGI) may be deducted.
This means an individual with an AGI of $50,000 would be able to deduct any qualifying expense beyond $3,750 ($50,000 x 7.5%). If the individual’s medical expense were $10,000 for tax year, $6,250 would be tax-deductible ($10,000 – $3,750).
Tax deductions are always nice, but having these expenses covered by insurance is even better. Once you have gathered up your medical expenses for the year, contact me to do a review to see if there are coverage options available that you may benefit from.