Allowable IRS Medical Expenses Tax Deduction Guidelines
You can deduct many medical expenses. You can deduct any expense you pay for the prevention, diagnosis, or medical treatment of physical or mental illness, and any amounts you pay to treat or modify any part or function of the body for health, but not for cosmetic purposes.
(So you can deduct the cost of Lasik eye surgery to correct your vision, but not the BOTOX® injections to smooth the wrinkles around your eyes.) You can also deduct the cost of transportation to the locations where you can receive this kind of medical care, your health insurance premiums, and your costs for prescription drugs and insulin.
Medical expenses are only deductible if you itemize and only if they exceed 7.5 percent of your adjusted gross income (10% if you are subject to the Alternative Minimum Tax). You can only deduct the medical and dental expenses above that floor.
Example: Emma's adjusted gross income was $100,000, and she spent $8,000 on medical expenses. Because her expenses equal at least 7.5 percent of her adjusted gross income, she can take the deduction for the amount above $7,500. Her deduction, then, is for $500.
There is an exception for health insurance premiums paid by self-employed individuals. They can claim 100% of their health insurance premiums as an above-the-line deduction, which reduces their adjusted gross income. Qualified long-term-care expenses may be treated as a medical expense subject to the 7.5 percent of AGI floor, including a specified deductible amount for long-term care insurance premiums, which ranges from $290 to $3,680 in 2007 depending on the age of the policyholder. In 2008, the deductible amounts for long-term care insurance premiums range from $310 to $3,850.
Deducting Medical Expenses for Someone Else
You can deduct medical costs you pay for another person according to the following rules:
- If you pay medical expenses for someone whom you do not claim as a dependent on your income tax return, you can deduct those expenses if:
- He or she either lived with you for the whole year as a member of your household, or he or she is related to you (as described in the section Who's a Relative), and
- He or she was a U.S. citizen or legal resident, or was a resident of Canada or Mexico for some part of the year, and
- You provided over half of his or her support for the year.
Note that these rules are slightly less stringent than those for the dependency exemption. Therefore, it's possible that you can deduct medical expenses you paid for one of your parents even if they filed their own joint return.
- If you paid a person's medical bill this year for an expense incurred last year, and that person was your dependent last year, you can deduct the expenses on this year's return even if he or she isn't your dependent this year. The key is the fact that the person was your dependent when the medical services were provided.
- If you're divorced and pay medical expenses for your child, but don't claim him or her as a dependent, you can still deduct those expenses. This assumes that you would otherwise qualify to take a dependency exemption for your child.
- You can deduct medical expenses that you pay for your spouse. What most people don't know is that you can claim medical expenses for your spouse's medical treatments that occurred before you were married if you paid those bills after your marriage. The rule is that you must be married either at the time of the medical treatments or at the time the bills are paid.
Are you missing out on deductions you deserve to claim? Use TurboTax Online to help identify over 350 tax credits and deductions available and which ones you are eligible for.
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