It’s no secret that millions of Americans continue to struggle to pay off outstanding medical debt. Americans fail to pay $458 billion a year in taxes, and while individual audits may be rare, it’s important to do all you can to file your taxes efficiently and make the proper deductions when possible. Here’s a quick and easy guide to help you properly claim medical expenses when filing your 2018 taxes this season.
What are the deduction values for medical expenses?
There’s no denying the high prices of many necessary medical supplies. For example, there are countless types of medical gases used in healthcare facilities nationwide, and these gases help to provide patients with oxygen and other vital gases during care. That being said, global specialty gases market is forecast to surpass $14 billion by 2026.
Fortunately, the IRS allows tax filers to deduct qualified medical expenses that exceed 7.5% of their adjusted gross income for both 2017 and 2018. Starting on January 1 of this year, taxpayers are required to deduct only the amount of the complete unreimbursed allowable medical treatment and care expenses that are more than 10% of gross adjusted income (AGI).
Keep in mind that your AGI is defined as your taxable income minus certain deductions like student loan interest or contributions to a traditional IRA. Turbo Tax explains:
“For example, if you have an adjusted gross income of $45,000 and $5,475 of medical expenses, you would multiply $45,000 by 0.075 (7.5%) to find that only expenses exceeding $3,375 can be deducted. This leaves you with a medical expense deduction of $2,100 (5,475 – 3,375).”
Which expenses are not deductible?
It goes without saying that not all types of medical expenses are tax-deductible. Examples include expenses you’re reimbursed for, either from your insurance or your employer. The IRS also doesn’t generally cover cosmetic procedures. Non-prescription drugs aside from insulin are non-deductible, as are other general health purchases like diet foods, toothpaste, health club fees, and more. Finally, you can’t deduct medical expenses that were paid in a different year.
Experts estimate that as much as 80% of the population will experience a back problem at some time in their lives, and if you’ve taken prescription medications that follow the guidelines listed above, they may be eligible for deduction. However, any pain-relief patches that were purchased over-the-counter are likely not tax-deductible.
How can taxpayers itemize their deductions?
In order to legally claim a medical expense deduction, you must itemize them properly. Keep in mind that itemizing necessitates that those making deductions cannot take the standard deduction, so it’s important to only claim the deduction if your itemized deductions are greater than your standard deduction.
Legally deducting medical expenses also requires you to use IRS Form 1040 to file taxes and attach Schedule A. For more information, talk to your local tax professional.
Ultimately, bankruptcies resulting from unpaid medical bills affected an estimated 2 million people in the United States during 2013 and continue to occur every year. While being able to claim certain medical expenses on your taxes may not be a one-size-fits-all solution, it’s certainly worth looking into for those who want to reduce their outstanding debts and increase financial efficiency.