Medical Expenses That Are Tax Deductible:
Medical expenses are an important part of your overall financial picture, but they can also be a minefield of potential pitfalls.
Even seasoned savers know that having too much money in savings accounts, making sure your investments grow at the right pace, and being mindful of any debt obligations are all key elements to maintaining a healthy financial position.
Unfortunately, medical expenses don’t always fall into this category, especially if you find yourself unexpectedly facing high costs from an injury, chronic condition or other health concern.
That being said, it’s worth knowing about certain medical expenses that you might be able to deduct from your taxes.
Medical expenses are an important part of your financial plan. They can help you save for retirement, pay for college, and other major life events. However, not all medical expenses are treated equally in the eyes of the tax code.
In addition to being subject to various different rules depending on the type of expense and your personal situation, some types of medical expenses may be more valuable than others when it comes to contributing to your savings goals.
That’s because certain types of medical expenses are deductible from your taxable income while others aren’t. Let’s take a look at the different types of medical expenses that you may be able to deduct from your taxes, as well as why some are more beneficial than others when it comes to helping you reach your financial goals.
Medical Care: What You Should Know
The costs of medical care are one of the most common types of deductions that many taxpayers take advantage of each year. With the high costs of health care, it’s no surprise that many people recognize the need to take advantage of any deductions that might be available.
While there are many different types of medical deductions that you may be able to take advantage of, the most common is the deduction for medical care. Medical care is any expense that you incur for the purpose of receiving medical treatment.
Certain medical expenses are deductible if you receive treatment from a dentist, podiatrist, or other medical professional that specializes in oral health care, such as an orthodontist. Dental expenses that are treated by a dentist include the costs of fillings, crowns, root canals, and other treatments.
However, if you choose to have a dental procedure that is not related to your dental health, such as orthodontic treatment to straighten your teeth, then that procedure is not treated as medical care and is therefore not deductible. Similarly, if you spend money to receive medical care that is unrelated to your dental health, then that expense is not deductible.
The cost of eye exams and treatments are often deducted as medical expenses. This includes the cost of glasses, contact lenses, ocular surgeries, glaucoma screenings, and other vision-related treatments.
However, you may also be able to claim the cost of glasses, contact lenses, and eye exams if they are related to your medical condition or treatment. For example, if you have diabetes and are undergoing treatment for your vision, you may be able to deduct the cost of an eye exam related to that treatment.
Similarly, if you are treated for cancer (such as eye surgery to remove a tumor) and require glasses to see clearly, you may be able to claim the cost of their purchase as a medical expense.
Prescription drugs are another type of medical expense that you may be able to deduct. However, the specific rules surrounding the deduction of prescription drugs are more complex than the deduction of other types of medical expenses.
First of all, you must be able to sufficiently establish the purpose and character of the expenses. This means that you must be able to show that the expenses were for medical care, that they were incurred for a specific medical condition, and that you meet other specific requirements as well.
Since prescription drugs are often very expensive and not always covered by insurance, it can be beneficial to claim the deduction. Additionally, certain medications may be eligible for a tax subsidy that can be used to reduce your out-of-pocket costs.
You may be able to claim the full cost of prescription drugs as a medical expense, or you may be able to claim a portion of the cost as a tax deduction and a portion as a tax subsidy.
Long-Term Care Insurance
If you purchase a qualifying long-term care insurance policy before your 65th birthday, you may be able to deduct the premiums as a medical expense.
The policy must have been purchased before you were age 65, and it must have been purchased with the intention of providing long-term care services. The premium of the policy must be paid by the end of the tax year in which you are age 65.
Additionally, you must have paid the entire premium by the end of the tax year in which you are age 65. A qualifying long-term care insurance policy must pay for care in a nursing home, for long-term care services provided by a hospital, or for both.
A qualifying long-term care insurance policy may not pay for home health care, medical equipment, or medical transportation or travel.
Irregularly Scheduled Medical Care
Certain medical expenses are treated as a type of irregularly scheduled medical care and are therefore deductible as a medical expense.
These include the costs of ambulance service, health care provided to you by a physician who does not regularly treat you, and sports or therapeutic activities that are related to your medical condition.
To be deductible as medical care, you must show that you incurred the expense with the intention of receiving medical treatment. The intention is important because it tells the IRS that you intend to use the expense to receive care, not just to cover the expense.
Other Taxable Medical Expenses
In addition to the eight types of medical expenses that are generally deductible, you may also be able to claim tax deductions for certain types of medical expenses that are not generally treated as medical care. These include the cost of insurance premiums, the cost of transportation related to medical treatment, and other expenses related to the birth or adoption of a child.
Exemption for Some Medical Expenses
There are some types of medical expenses that are completely exempt from taxation. This includes the costs of disability insurance payments, the cost of long-term care insurance, and the cost of medical care for eligible veterans or members of the military.
These expenses are completely tax-free and are not treated as a medical expense for tax purposes. There are a few other types of medical expenses that are partially exempt from taxation. Certain types of medical expenses that are generally not considered to be extraordinary are treated as a portion of your income and are subject to taxation.
Maintaining healthy financial habits can help you reach your retirement savings goals and protect yourself financially in the event of an unexpected financial setback. Of course, it’s also important to know when to take advantage of the tax deductions and credits that can help you save more money.
That’s why it’s important to familiarize yourself with the different types of medical expenses that are deductible and which aren’t.