Are Medical Bills Tax Deductible?
Medical bills are a significant part of our lives. They can often become a cause of worry for many too.
This is especially true for those recovering from the effects of the worldwide pandemic. Many taxpayers are eager to know, are medical bills are tax deductible.
Luckily, if your medical bill is not completely covered by your insurance provider, then you may be able to get your taxes reduced.
In this article, we have listed details of getting tax deductions on medical bills, the value of deduction, non-deductible medical expenses and how to claim a tax deduction on medical bills.
Tax deduction on medical bills
The Internal Revenue Service (IRS) allows deduction on the reimbursed amounts spent on treatment, preventive care, surgeries, and dental and vision procedures.
Besides, visits to psychiatrists and psychologists are also classified under tax-deductible medical expenses.
Unreimbursed payments for hearing aids, false teeth, glasses and contact lenses as well as prescription medications are also tax-deductible.
The IRS allows a tax deduction on expenses for medical care traveling, such as parking fees, bus fare or mileage on your car.
Tax deduction value for medical expenses
The total deducible value for medical expenses varies. It depends on your income. This year, the IRS allowed taxpayers to deduct their entire eligible unreimbursed medical care expenses exceeding 7.5% of their adjusted gross income.
You can choose to itemize this tax deduction under the IRS Schedule A section.
You can calculate the specific amount for a tax deduction by deducting your taxable income from any adjustments to income.
These include contributions to conventional IRA and deductible student loan interest.
Non tax-deductible medical expenses
If a medical expense is about to get reimbursed cannot be deducted. This includes reimbursement of medical expenses from your insurance provider or employer.
Besides, the IRS prohibits reimbursement for cosmetic procedure expenses.
Non-prescription drugs, except insulin, are exempt from tax deductions. Medical expenses paid in previous years are also exempt from tax deductions.
Apart from this, if you use a flexible spending account, or health savings account, to pay medical expenses, then the amount is also non-deductible. This is because the money in such accounts is already tax-advantaged.
Claiming tax deductibles on medical expenses
You will need to itemize your deductions to claim tax exemption on medical expenses. Itemizing involves avoiding standard deduction.
You should only claim a tax deduction for medical expenses if the itemized deductions are greater than conventional deductions.
If you choose to itemize deductions, you should use IRS Form 1040 to file your taxes. You will also need to attach Schedule A documents along with Form 1040.
Here’s the process to apply for tax deductions for medical expenses:
- Report entire medical expenses for the current year on Line 1 of Schedule A form and add your Adjusted Gross Income from Form 1040 in Line 2 of Schedule A.
- Enter adjusted income of around 7.5% in Line 3 of the form.
- Next, enter the difference between expenses and 7.5% of AGI in Line 4.
- The resulting amount in Line 4 is then added to other itemized deductions (if any) and then subtracted from your AGI. This reduces your taxable income for the current year.
- In case this amount is less than your usual deduction, then you will normally need to itemize your deductions.
There are several opportunities for you to get tax deductions on your medical bills if you fulfill the criteria detailed by the IRS.
To learn additional details on getting tax exemption on medical expenses, you can choose to visit the official IRS website at https://www.irs.gov/help/ita/can-i-deduct-my-medical-and-dental-expenses.
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