Medical Expense Deduction: Which Expenses Are Deductible?Tax Deductions and Credits
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It happens all the time: A client walks in with a handful of doctor and drug receipts and says, “Here are my medical receipts. My neighbor’s ex-boyfriend’s mother-in-law said I can deduct these.”
Wouldn’t it be great if it were that easy?
But in reality, since the Tax Cuts and Jobs Act of 2017, fewer and fewer taxpayers are able to itemize and claim medical expenses.
Still, for those who can deduct on Schedule A it’s worth knowing which medical expenses qualify and which don’t.
Here’s a quick look at the medical deduction.
Learn More: Check out our 2019-2020 Tax Filing Guide!
Medical Expense Deduction Overview
What Is the Medical Expense Deduction?
The IRS allows taxpayers to deduct qualified medical expenses if the taxpayer itemizes and meets specific thresholds.
The taxpayer can deduct qualified medical expenses paid during the tax year for himself and his dependents.
Where to Claim the Medical Expense Deduction
Medical expenses are claimed on Form 1040, Schedule A.
They are the first item that appears on Schedule A, right ahead of taxes and interest deductions.
How to Calculate the Medical Expense Deduction
The formula for deducting medical expenses has a few twists and turns.
Before benefiting from these expenses, there are two hurdles to clear:
(1) The amount of qualified medical expenses must exceed 7.5% of the taxpayer’s adjusted gross income for tax year 2019 and 10% of the taxpayer’s adjusted gross income for 2020. Only the excess counts toward the deduction.
(2) Once that hurdle is cleared, the taxpayer’s total itemized deductions must exceed his or her standard deduction amount for his or her filing status.
Medical Expense Deduction Example
Consider a single filer with an adjusted gross income of $60,000 for the 2019 tax year.
The taxpayer also has $6,000 in medical expenses; $2,000 in state income taxes; $3,000 in property taxes; $5,000 in mortgage interest; and $2,000 in charitable donations to deduct.
The income tax, property tax, mortgage interest, and donations are dollar-for-dollar deductions.
But to calculate the medical deduction we first must multiply the taxpayer’s AGI of $60,000 by 7.5% (0.075) to calculate a threshold of $4,500.
Subtract that figure from the $6,000 in qualified medical expenses, and the deduction comes to $1,500.
Adding those figures: $1,500 + $2,000 + $3,000 + $5,000 + $2,000 = $13,000.
With the standard deduction being $12,200, one can see it would be worth itemizing — and those $1,500 in medical expenses put you over the top!
Remember, however, that in 2020 the allowable deduction threshold will rise to 10%, meaning it will be even more difficult to deduct medical expenses.
If the example above were for tax year 2020, none of the medical expenses would be deductible and it would not be worth itemizing.
How to Deduct Medical Expenses
The IRS allows taxpayers to deduct out-of-pocket, unreimbursed medical expenses such as hospitalizations, preventative care, and surgeries.
Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners all are deductible.
Prescription medications and durable goods such as glasses, false teeth, and hearing aids are also deductible.
And almost all after-tax insurance premiums are deductible. See below for details.
Whose Medical Expenses Can I Deduct?
You generally can deduct medical expenses for yourself as well as those paid for a spouse or a dependent.
The person for whom you are claiming the expenses does not have to be on your tax return in the year you are paying for the services, as long as they were on it when the expenses were incurred.
The key here is that the expenses are deductible in the year they are paid.
Deductible Medical Expenses
Here’s a list of some common medical items taxpayers can deduct:
- Abortion: Regardless of state laws, it’s deductible until Congress or the Supreme Court says otherwise.
- Alcoholism and Drug Addiction Treatments: Inpatient treatments are deductible; check with a tax professional on other treatments. You also can deduct mileage expenses to and from AA meetings (20 cents per mile in 2019).
- Baby Expenses: Equipment related to child birth, including breast pumps and lactation devices, are deductible. Maternity clothing is not deductible.
- Certain Home Improvements: Special equipment installed in a disabled person’s home such as ramps, railings, elevators, door widenings, and modifying cabinets are deductible. However, only the portion of the improvement that does not increase the overall value of your property is deductible. Apply liberally.
- Eye Care: The eyes have it. Deductions are allowed for eye exams, contact lenses, eyeglasses, and eye surgery.
- Insurance Premiums: Health, dental and vision premiums are deductible as long as they weren’t taken out pre-tax by an employer. Just beware, if you take a medical expense deduction and later are reimbursed by your insurance company, you will have to report the amount deducted as other income in the year it is reimbursed.
- Lodging: You can deduct the cost of lodging (up to $50 a night) and meals if traveling away from home to a medical facility. Be careful, there are restrictions here.
- Long-Term Care and and In-Home Nursing Services: The cost of nursing and home care is deductible. This deduction can be very useful because out-of-pocket expenses can reach more than $100,000 in a single year.
- Medicare: Parts A, B and D are deductible.
- Premium Tax Credits: Any amount a taxpayer pays for marketplace insurance that is in addition to their premium tax credit is deductible.
- Prescriptions: Doctor-prescribed medications, including birth-control pills, are deductible. Prescriptions must be purchased within the United States to be deductible, however.
- Service Animals: If the pet is prescribed by a doctor, then just about every expense associated with a service animal is deductible.
- Smoking Cessation: Smoking cessation programs and prescribed drugs are deductible, but non-prescribed drugs are not.
- Transportation: Trips to doctors’ offices, pharmacies, hospitals, and other such locations where care is received are all are deductible. The standard mileage rate is 20 cents per mile for 2019 and 17 cents per mile for 2020.
- Weight Loss Programs: Programs prescribed by a physician to treat a specific obesity disease such as high blood pressure and diabetes are deductible. Health club and gym memberships do not count unless the charges specifically are for weight loss.
Nondeductible Medical Expenses
And here’s a list of items and procedures that don’t make the cut:
- Cosmetic Surgery: Procedures such as breast enhancement and hair transplants performed for the purpose of improving one’s appearance are not deductible. You can include the amount you pay for cosmetic surgery if it is necessary to improve a deformity related to a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. An example would be reconstructive breast surgery after a mastectomy because of cancer.
- Dancing and Swimming Lessons: These are not deductible, even if recommended by a doctor.
- Flexible Spending Arrangement (FSA) and Health Savings Account (HSA) Spending: The contributions are already deductible y already are pre-taxed by your employer. Tip: With it being so difficult these days to itemize on Schedule A, take advantage of these tax-free benefits.
- Funeral Expenses: A funeral is not a medical event and is therefore not deductible.
- Medical Marijuana: It’s not legal according to federal law and hence is not deductible even if legal in your state.
- Nutritional Supplements: They’re taken to maintain good health and are not considered medical care.
- Non-Prescribed Prescriptions: With the exception of insulin, medications purchased in stores without a prescription are not deductible.
- Pre-Taxed Health Insurance Premiums: Premiums are deductible only if paid after-tax. If your employer offers health insurance, your premiums almost always are tax-free.
- Teeth Whitening: This is considered cosmetic and is therefore not deductible; don’t let your dentist tell you otherwise.
Maximizing the Medical Expense Deduction
The medical expense deduction must be taken in the year it is paid. In other words, if you have weight loss surgery in September 2020, but don’t pay your $16,000 bill until January 2021, it would be deductible in 2021.
So if you plan to have more out-of-pocket surgeries during 2021, it might make sense to wait until January 2021 to pay your 2020 bills and then pay 2021 bills by Dec. 31, 2021.
Filing Separately from Your Spouse
If you’re thinking of taking medical deductions and filing separately, remember: the IRS does not allow one spouse to itemize on Schedule A and the other to take the standard deduction.
Both spouses must either itemize or take the standard deduction ($12,200 in 2019).
And it rarely works for both to itemize, unless one spouse exceeds the $12,200 standard deduction threshold by a lot.
Other Tax Benefits for Medical Expenses
There are several pre-taxed medical savings accounts that taxpayers can take advantage of, usually through employee benefits plans. These include:
- Health Savings Accounts (HSAs)
- Flexible Spending Arrangements (FSAs)
- Health Reimbursement Arrangements (HRAs)
Health Savings Accounts
An HSA is a tax-free medical savings plan available to people enrolled in high-deductible health plans (HDHP).
Money contributed to an HSA through an employer is tax-free, but after-tax dollars invested by the taxpayer can be deducted as an income adjustment.
The money must be spent on qualified medical expenses, but it rolls over from year to year if not spent.
There are annual contribution limits ($3,500 for a single plan and $7,000 for a family plan, with an additional $1,000 catch-up contribution for 55-plus taxpayers).
Flexible Spending Arrangements
FSAs work much like HSAs except money contributed to an account generally must be spent by the end of the tax year.
The maximum contribution limit for 2020 is $2,750.
Health Reimbursement Arrangements
An HRA is a tax-free employer-funded plan that reimburses employees for medical-care expenses. In 2020, employers could offer reimbursements up to $5,250 per employee and $10,600 per employee with a family.
Unused funds carry forward.
State Medical Expense Deduction Rules
If you are required to file a state tax return, you may be able to itemize and take a medical-expense deduction.
Most states use the same AGI threshold as the federal government, and some allow taxpayers to itemize even if they choose the standard deduction on his or her federal return.
Other states, however, decouple from the federal requirements. New Jersey, for instance, sets a 2% income threshold rather than federal 7.5% in 2019 and 10% in 2020.
Check your state’s department of revenue site for specifics.
Frequently Asked Questions
- Is the 7.5% AGI threshold permanent?
No. The threshold increases to 10% in 2020 and beyond.
- If I was reimbursed for a particular medical expense, can I still deduct it?
No. In order to deduct the expenses you must have paid them after-tax and not have been reimbursed.
- Can I deduct this year’s medical expenses that I paid last year?
No. Medical expenses are deductible in the year paid, not in the year you received the services. But you could amend your previous year's return to include them if you didn't.
- What records should I keep if I take the medical expense deduction?
Keep original receipts for at least five years.
- If I travel outside the United States to have surgery, can I deduct those expenses?
Yes, and more and more Americans are finding the cost of airfaires and other travel expenses for a procedure outside the U.S. with no insurance is less expensive than doing it here with insurance. Just remember, prescriptions filled outside the U.S. are not deductible.
- My son had eye surgery last year when I claimed him on my tax return. He now lives with his mother, but I paid a $20,000 hospital bill in 2019.
Can I deduct it? Yes, you can claim a deduction for a dependent as long as he or she lived with you or was claimed on a tax return and you paid the expenses.
- If I travel with my dependent daughter for her surgery can I deduct lodging and meals?
Yes, though there are limitations. For example, there is a $50 per day limit on lodging. Always save receipts.
David was originally in the newspaper business, spending over 25 years as a writer and editor. He is now an enrolled agent — the highest credential issued by the I.R.S. — and has been serving clients as a tax adviser and preparer for over 10 years. He currently works at DC & Associates, P.A. in Casselberry, Florida.