Are Copays Tax Deductible

Are Copays Tax Deductible – Overview

Medical expenses may imbalance your financial state even if you have your health insurance policy. This is because health insurance companies cover medical expenses at a certain percentage. One has to pay up to 30% for medical services with a health insurance policy.

Health Insurance Companies provide cost-sharing facilities to cut down on expenses. A copay is one of the most well-known methods associated with health insurance policies. Are copays tax deductible? Let’s find out!

What is Copay in Health Insurance

Are Copays Tax Deductible – What Is Copay in Health Insurance?

A copay is a cost-sharing facility offered by health insurance companies. In this method, the insurer pays a portion of the total medical expenses. The health insurance company pays the remaining amount.

If you or your dependents have been in the hospital with high medical expenses, you can claim for tax-deductible under some criteria. This blog will help you understand the basics of tax-deductible health insurance policies and cost-sharing methods such as copays.

Copays are generally considered a part of your medical expenses and can be tax deductible if you itemize deductions and your total medical expenses exceed 7.5% of your adjusted gross income. Policyholders pay copays as flat fees along with their insurance premiums.

Medical expenses paid by insurance companies are not deductible, but out-of-pocket expenses, including copays, that are not reimbursed by insurance can be considered for deduction. You can only claim for the bills that you pay.

Even if you have your health insurance policy and regularly pay your copayments, you can still claim a medical expense deduction. Let’s find out how.

What Do You Mean by Medical Expense Deduction

Taxpayers can deduct qualified medical expenses exceeding 7.5% of their adjusted gross income per the tax laws. Initially, the tax-deductible percentage against adjusted gross income was 10%. However, the federal department has changed it to 7.5% this year. (1)

If you are wondering what medical expenses could be deductible under the new tax laws, here’s the full list!

List of Medical Expenses that are Tax Deductible

Hospital and nursing care
Payments to medical services such as fees of doctors, surgeons, psychiatrists, chiropractors, psychologists, dentists, etc.
Doctor diagnose diseases
Cost of infertility treatments and care
Birth control pills
Cost of medical equipment installed in your home for health improvement
Legal abortions
Weight-loss programs, smoking cessation programs or nutritional counseling (2)
Prescription drugs
Prescribed Insulin
Transportation costs to a hospital or medical care
Dentures and other dental-related expenses
Admission and transportation to medical facilities
Long-term insurance care and insurance premiums
Acupuncture programs

Do I Have to Follow Any Rules for Medical Expense Deduction

You cannot claim a deduction for medical expenses that are reimbursed by insurance companies. However, you can include the medical expenses you have paid in the current financial year.

What Types of Services Are Not Considered for Medical Expense Deduction

Cosmetic surgeries
Vacations
Over-the-counter medicines
Funeral or burial expenses
Medicines or services without a doctor’s prescription
Toiletries, cosmetics, toothpaste, etc.
Nicotine gum

What’s the Procedure to Claim Medical Expenses on Taxes

To deduct medical expenses, you must itemize deductions instead of taking the standard deduction. Instead, select the itemizing method where you have to itemize your deductions. It takes some time, but it is worth doing as following this method would save a lot of money in tax refunds.

While filing your returns, you must remember that the qualifying medical expenses above 7.5% of your adjusted gross income will be considered for deduction.

Let’s recall the data from the previous year.

For 2023, the standard deduction for a single filer was $13,850.
The amount for heads of household was $18,800. For married taxpayers, the amount was $25,100, i.e., for joint filers. One must itemize the deductions to save money if the total amount exceeds these.

If your adjusted gross income is $60,000 and you spent $10,000 on medical expenses, only the amount that exceeds 7.5% of your adjusted gross income ($4,500 in this case) is deductible, making $5,500 potentially deductible. The remaining $5,500 is tax-deductible, and you can claim a refund. You need to itemize deductions.

Bottom Line

The medical expenses deduction is beneficial to those with high medical services. It is directly associated with the adjusted gross income. If confused, calculate using the given methods and figure things out easily.

Be sure to include medical expenses for yourself and other family members, including your spouse and children, on your tax return, as it will benefit each of you in the long run.

You can even claim for medical expenses that you pay for your parents under the tax returns. So, educate yourself before you file your next income tax returns!