Claiming Medical Bills on Taxes: What You Need to Know

Claiming medical bills on taxes can be a bit of a challenge, but don't worry, we've got you covered. You can deduct medical expenses that exceed 10% of your adjusted gross income (AGI) from your taxes.

If you're self-employed, you can deduct medical expenses on Schedule C, which is a form used for business expenses. This can include mileage for medical appointments and expenses related to your home office.

Some medical expenses, like insurance premiums and copays, are eligible for deduction, but others, like cosmetic procedures, are not.

So, what are tax-deductible medical expenses? According to the IRS, they're primarily for alleviating or preventing a physical or mental disability or illness. Medical expenses must be unreimbursed, meaning insurance, employers, or health savings accounts won't cover them.

To qualify, expenses must be medically necessary, not voluntary or cosmetic. For example, a blood pressure monitor is deductible if a doctor told you to take your blood pressure every day. Eyeglasses and vision care are also deductible, but not over-the-counter medications or supplements.

The IRS allows you to deduct unreimbursed expenses for preventative care, treatment, surgeries, and dental and vision care. You can also deduct unreimbursed payments for prescription medications and appliances like glasses, contacts, false teeth, and hearing aids.

Here are some examples of deductible medical expenses:

Remember, only unreimbursed expenses are tax-deductible, so make sure to keep track of what your insurance covers and what you need to pay out of pocket.

To claim medical expenses on your taxes, you must itemize your deductions, which means you won't take the Standard Deduction.

You can deduct unreimbursed expenses for preventative care, treatment, surgeries, dental and vision care, and prescription medications, as well as expenses for travel to receive medical care.

To itemize, you'll use IRS Form 1040 and attach Schedule A, where you'll report your total medical expenses paid during the year and your adjusted gross income.

You can deduct medical expenses that exceed 7.5% of your adjusted gross income, which means if your AGI is $45,000, you can only deduct expenses exceeding $3,375.

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If your itemized deductions, including medical expenses, are less than the Standard Deduction, you won't itemize and won't receive medical expense deductions.

You can include payments for diagnosis, cure, mitigation, treatment or prevention of disease, or payments for treatments affecting any structure or function of the body.

Here's a rough estimate of the medical expense deduction value based on your income:

Keep in mind that only medical expenses for yourself, your spouse, or your dependents are typically deductible, but there may be exceptions for qualifying relatives, such as adult children who provide more than half their support.

To claim medical expenses on your taxes, you'll need to keep good records of your expenses, including receipts and medical bills, to ensure you can accurately report them on Schedule A.

Health Savings Accounts can be a great alternative to itemizing federal deductions, especially if you have high medical expenses. Contributions to these accounts are tax-deductible, and the money grows tax-free.

You'll need an eligible high-deductible health insurance plan to open a Health Savings Account, which allows individuals to contribute up to $3,600 in 2021, while those with family plans can contribute up to $7,200.

Money deposited in an HSA rolls over each year, so you can save for future medical expenses.

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Health Savings Accounts can be a game-changer for medical expenses. Contributions to these accounts are tax-deductible.

To open a Health Savings Account, you'll need an eligible high-deductible health insurance plan. Individuals can contribute up to $3,600 to their HSA in 2021, while those with family plans can contribute up to $7,200. Money deposited in an HSA rolls over each year so it can be saved for future expenses.

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If you've had to pay for COVID-19 treatment, you're in luck because those expenses are tax-deductible as an itemized deduction.

Many private health insurance companies have agreed to cover all COVID-19 treatment costs, including deductibles or copayments, so you might not have any expenses to worry about.

However, if you do have expenses, you can claim the medical expense deduction by itemizing your deductions on your tax return.

To claim the medical expense deduction, you must use IRS Form 1040 and attach Schedule A, which is where the magic happens.

On Schedule A, report the total medical expenses you paid during the year on line 1 and your adjusted gross income on line 2.

Enter 7.5% of your adjusted gross income on line 3, and then enter the difference between your expenses and 7.5% of your adjusted gross income on line 4.

The resulting amount on line 4 will be added to any other itemized deductions and subtracted from your adjusted gross income to reduce your taxable income for the year.

Here's a quick rundown of the steps to claim the medical expense deduction:

If your itemized deductions, including the medical expense deduction, are greater than your Standard Deduction, then it's worth itemizing.

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Missing available deductions is a common mistake that can cost you money. You might be overlooking health insurance premiums taken from paychecks and Medicare premiums withheld from Social Security benefits.

Not knowing your state's rules can also lead to missed opportunities. For instance, New Jersey allows taxpayers to deduct unreimbursed medical expenses that exceed 2% of their income.

Poor recordkeeping can make it difficult to prove your medical expenses if you're audited. Keep copies of all receipts and billing statements to make it easier to calculate your deduction at tax time.

Any medical expenses you get reimbursed for, such as by your insurance or employer, can't be deducted.

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Missing available deductions can be a costly mistake, so it's essential to familiarize yourself with the tax code to avoid overlooking deductions like health insurance premiums taken from paychecks.

Health insurance premiums withheld from paychecks and Medicare premiums taken from Social Security benefits are two examples of deductions that often get overlooked.

Not knowing your state's rules can also lead to missed opportunities for deductions, as each state has its own set of rules and regulations.

For instance, New Jersey allows taxpayers to deduct unreimbursed medical expenses that exceed 2% of their income, even if they don't have enough expenses to claim a federal tax deduction.

Poor recordkeeping can lead to audit issues and make it harder to calculate your deduction at tax time, so it's crucial to keep copies of all receipts and billing statements.

You don't need to send documentation when claiming medical deductions, but having good records will make a big difference if you are audited.

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Some medical expenses are not tax-deductible, and it's essential to know which ones to avoid claiming.

Any medical expenses you get reimbursed for, such as by your insurance or employer, can't be deducted.

You typically can't deduct the cost of nonprescription drugs (except insulin) or other purchases for general health, such as toothpaste, health club dues, vitamins, diet food, and nonprescription nicotine products.

You also can't deduct medical expenses paid in a different year.

Surgery that is strictly cosmetic, health club dues, and weight-loss programs that aren’t medically necessary aren’t tax-deductible.

Neither are hair transplant procedures or electrolysis.

If you pay for your medical expenses using money from a flexible spending account or health savings account, those expenses aren’t deductible because the money in those accounts is already tax-advantaged.

You can claim medical bills on taxes by itemizing your deductions, which requires you to file Form 1040 with Schedule A attached. This is where you'll report your total medical expenses paid during the year.

To itemize, you'll need to calculate the difference between your medical expenses and 7.5% of your adjusted gross income. This is done by entering 7.5% of your adjusted gross income on line 3 of Schedule A.

TurboTax can also help you with this calculation, and they offer various levels of assistance, including expert review and maximum refund guarantees. Their Live Full Service and Live Assisted options can be a big help if you're not sure where to start.

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If you're filing your own taxes, TurboTax will guide you through the process step by step. You can choose to file for free if you qualify, or upgrade to a paid version for more features and support.

Here's an example of how to calculate the deductible amount for medical expenses in Vermont:

Note that Vermont allows you to deduct medical expenses, but the amount may be limited if you've already claimed a standard deduction or personal exemptions.