Are you hoping to claim the dental and medical expense tax deduction this year? What is this tax deduction, and how does it work on your annual tax return?
You might wonder if this is the most beneficial avenue for you to take. What is the difference between tax deductions and tax credits? Which tax benefits will serve you the best?
While we recommend working with a tax professional when it comes to tax benefits, we will walk you through the details of the dental and medical expense tax deduction, including the details of what is and what is not included in this tax deduction.
What is the Dental and Medical Expense Tax Deduction?
A tax deduction is an amount you are able to take off your taxes to reduce your taxable income. Unlike a tax credit, a tax deduction does not necessarily reduce the amount of your tax bill, but in most cases, it will help considerably.
Basically, tax credits will give you a dollar-for-dollar deduction off your tax bill if you qualify for them; tax deductions just reduce your taxable income, which may or may not reduce your tax bill. The dental and medical expense tax benefit is a tax deduction, to be clear.
For the dental and medical expense tax deduction, according to IRS Publication 502: Medical and Dental Expenses (Including the Health Coverage Tax Credit), certain dental expenses may be included as “medical expenses.”
For this tax deduction, you are able to use Schedule A: Itemized Deductions of IRS Form 1040 to deduct your qualified medical and dental expenses. However, only the portion of your qualified expenses that exceed 7.5% of your AGI (adjusted gross income) is counted.
What is Included in This Tax Deduction?
In the above-mentioned publication, IRS Publication 502, there is a complete list of what is counted as a dental or medical expense for this tax deduction.
Some of the unique items that are listed and included that you may not know are as follows:
- Admission costs and transportation costs to and from medical conferences related to diseases that you or one of your dependents have, do count.
- Weight-loss program costs for medically-diagnosed diseases, such as obesity, count. However, health club dues do not typically count.
- Acupuncture services are permissible.
- Recovery programs for addiction issues, such as drugs and smoking, do count.
- Hospital and home health care costs, such as a home healthcare nurse, do count.
- Transportation costs included as part of medical care do count.
- Hearing aids, crutches, wheelchairs, contact lenses, dentures, and prescription (and some non-prescription) glasses do count.
- Insurance costs, such as premiums, for dental and medical care or for long-term healthcare insurance do count, provided they are not paid by your employer and are costs that you incur and pay as out-of-pocket expenses after taxes.
Since many of these items are conditional, it is wise to seek the advice of a qualified tax professional when completing your tax return. Tax deductions and tax credits can become confusing, especially if you have multiple tax benefits to claim on your taxes.
An additional item to note is that you are only permitted to take the medical expense tax deduction for dental and medical expenses you paid for during the tax year. Also, if you were reimbursed for a dental or medical expense, it is not considered to be deductible.
What is Not Included in This Tax Deduction?
There are, of course, many dental and medical expenses that do not qualify for this tax deduction. Each year, the rules typically are adjusted, so it is advisable to get a tax consultation with a tax expert if you plan to qualify for a tax deduction this tax year.
Here are a few of the listed items that do not qualify for the dental and medical expense tax deduction. Be sure to verify this information with IRS Publication 502 for a more detailed list and for more information.
- Burial or funeral costs do not qualify for this tax deduction.
- Any over-the-counter medications do not qualify for this deduction.
- Toiletries, cosmetics, and similar expenses do not count for this tax deduction.
- The majority of cosmetic surgical procedures do not count for this tax deduction.
As the loss of a loved one can be a costly experience, be sure to check out our financial tips for such a circumstance. While funeral costs may not be covered by this tax deduction, there are things you should know in the event of a burial and funeral. Our article on funeral finances should assist you in this matter, or reach out to our office!
How to Claim the Dental and Medical Expense Tax Deduction
Now that we have covered what the dental and medical expense tax deduction is and what is covered and not covered with this tax deduction, it is time to discuss how to take the tax deduction. You will need to itemize your taxes, which means that you will not take the standard deduction this year.
Of course, you should only do this if it is beneficial to do so. A tax expert can help you determine which method will leave you with the best tax results.
Use Schedule A (Itemized Deductions), as mentioned above, to determine the amount of your tax deduction.
Because it does take the management of detailed records to take this deduction, it’s important that you consider whether it is worth it. Consult a tax accountant to help you with your filing status and to assist you in filling out any schedules or forms that you must have completed.
We hope you now understand the dental and medical expense tax deduction a bit better, but, of course, if you have any questions, we are here to answer them! You can trust Indiana’s tax expert to point you in the right direction this tax year and every year!
Just book a free consultation with Sherry Borshoff to find out how she can best meet your tax needs this year! We are excited to add you to our list of happy clients!