Paying for health insurance and medical bills can get costly. Luckily, you can recoup some of those costs when you file your taxes by taking a deduction for medical expenses. To do so, the expenses in questions must meet the qualifications outlined by the IRS. You should also know that the recent Tax Cut and Jobs Act made some changes that make it harder to deduct medical expenses. We’ll show you how to figure out whether your expenses qualify, and how to calculate and take your deductions.
Calculating Your Medical Expense Deduction
For the tax years 2017 and 2018, you were eligible to deduct the total amount of your medical expenses that exceed 7.5% of your adjusted gross income (AGI). For the tax year 2019, you’ll only be able to deduct expenses that exceed 10% of your AGI. This change is due to the Tax Cuts and Jobs Act, which Donald Trump signed in late 2017.
You can get your deduction by taking your AGI and multiplying it by 10%. If your AGI is $50,000, only qualifying medical expenses over $5,000 can be deducted ($50,000 x 10% = $5,000). If your total medical expenses are $6,000, you can deduct $1,000 of it on your taxes.
Note, however, that you’ll need to itemize deductions to deduct medical expenses. Itemizing deductions only makes sense if the total deductions you qualify for would exceed your standard deduction a fixed dollar amount that reduces the amount of money you’re taxed on.
The Tax Cuts and Jobs Act effectively doubled the standard deduction, which makes it less likely that you’ll wind up itemizing. For the tax year 2019, which you’ll file in 2020, the standard deduction limits are as follows:
If the value of your total itemized deductions would exceed your standard deduction, you’ll need to complete a Form 1040 and detail every deduction in an itemized list. The standard deduction may be easier, but if you paid a lot of healthcare expenses or have other deductible expenses, they could help you reduce your tax bill.Medical Expenses You Can Deduct
Many medical-related costs can be included in your itemized deductions. Remember that you can only claim medical expenses that you paid for this year only, whether it’s for you, your spouse or another dependent. Dependents can include children and other relatives you care for. Here are the expenses that qualify:
A self-employed health insurance deduction is allowed for those who qualify, but it’s adjusted for income and not an itemized deduction.Medical Expenses You Can’t Deduct
While there’s a decent amount of healthcare costs you can itemize on your taxes, there are a few that don’t qualify, including:
Any medical expenses that you already get reimbursed for, whether from insurance or from your employer, can’t be deducted on your taxes. You also can’t deduct your employer’s share of health insurance premiums.
If you’re still not sure which expenses qualify, you can determine if it’s eligible through the IRS.Bottom Line
There are plenty of qualifying medical expenses that can claim on your taxes. But you can only deduct expenses that exceed 10% of your adjusted gross income. And if your total itemized deductions don’t exceed the new, higher standard deduction, then you won’t take the deduction. Review the list of expenses that qualify (and the ones that don’t), and decide whether it makes sense to take this deduction.Tax Filing Tips
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