How to Deduct Your Medical Expenses from Your Tax Return

There’s a brand-new tax law that is keeping the 7.5% threshold on medical expense deduction for the next 2 years. This new law will continue to allow millions of Americans with high medical expenses to deduct those costs from their tax returns. That means all taxpayers can write off health care spending that exceeds 7.5% of their income.  The fate of this law has been uncertain during the congressional debate, as the House of Representatives’ Republican tax proposal eliminated it. However, the Senate GOP chose to maintain the tax law at the lower 7.5% threshold for the next two years. After that, it’ll rise to 10% of taxpayer’s income.

How Does This Law Impact Seniors?

Around 9 million Americans deducted medical expenses from their tax return in 2015. Almost 50% of those were older than 50. Of those who used the deduction, 70% had incomes below $75,000 and 49% earned less than $50,000 per year. This law is hugely important to Medicare beneficiaries who spend an average of $5,680 per year on health expenses that Medicare doesn’t cover.

How to Deduct Your Medical Expenses from Your Tax Return

To claim this deduction from your tax return, filers must first itemize their taxes. According to experts, however, the Tax Cuts and Job Act doubles the standard deduction – to $12,000 for individuals and $24,000 for joint filers – which may change the number of filers who itemize.

“We’ve estimated that about 30 percent itemized in 2017, and we think that’s going to go down to about the 10 percent range going forward,” says Mark Mazur, director of the nonpartisan Tax Policy Center and an assistant secretary for tax policy in the Treasury Department under President Obama.

Rather than assuming that you won’t qualify for this tax benefit, Mazur recommends running the numbers first. He says some people will be likely surprised that they can take this deduction.

Which Medical Expenses Are Eligible for the Deduction?

Here’s a list of medical expenses that you can deduct from your tax return:

  • Fees for doctors, dentists, chiropractors, psychiatrists, psychologists, podiatrists and other medical professionals that are not covered by Medicare or other health insurance
  • Health insurance premiums — as long as they weren’t paid with pretax dollars, as most employer-based health benefits are. You can deduct Medicare Part B premiums and any premiums you pay for a Medigap policy, Medicare Advantage plan or a Part D Prescription drug plan.
  • Premiums for long-term care insurance and payments to nursing homes and similar long-term care facilities
  • Inpatient alcohol and drug treatment programs
  • Wheelchair ramps and other modifications you had to make to your home for medical reasons
  • Transportation to and from the doctor and other medical appointments. This includes taxi or bus fares, as well as costs for using your personal car, including parking.
  • Copays for prescription drugs
  • Copays for physical or occupational therapists
  • Payments for dentures, prescription eyeglasses or readers, hearing aids, crutches, wheelchairs as well as other durable medical equipment
  • Payments for smoking-cessation programs and weight-loss programs related to a specific disease diagnosed by a doctor, including obesity.

Unsure if one of your expenses is eligible for the tax deduction? There is a list of what isn’t deductible on the IRS website. In addition, the IRS has an Interactive Tax Assistant that can help you figure out if your medical expenses are deductible or not.