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When you look at your yearly personal expenses, medical bills could be a significant part of them. With rising healthcare rates, even the smallest medical assistance could cost you a fortune. And if the illness is serious or you need to undergo surgery, the cost could be devastating.
To get relief from this hefty burden on your pocket, the IRS offers tax deductions on medical bills. In this article, we are going to discuss when you can get tax returns on your medical bills, how much is deductible, and some tips for claiming the same.
How Many Deduction Can You Get on Medical Charges?
When your medical expenses in the year 2022 exceed 7.5% of your adjusted gross income, you can claim a tax deduction on the balance amount.
Let's understand this with the help of an example. Assume your AGI (Adjusted Gross Income) is $1,00,000, so anything above $7500 (7.5% of $1,000,000) is tax deductible. So in case you've paid $9000 on your medical bills, you can claim a tax return of $9000 – $7500 = $1500.
What Types of Medical Expenses Are Tax Deductible?
Not every penny you spend on your medical bill falls under deductions. The IRS has listed which expenses are allowed for a tax return and which are not.
The following are some of the medical expenses you can file a return for. Expenses incurred can be for yourself, your spouse, or your dependents.
- Expenses on hospital bills and nursing home bills
- Payments made to medical practitioners, including alternative medicine practitioners
- Expenses on eyeglasses, hearing aids, wheelchairs, crutches, etc.
- Money spent on transportation, to and from the medical center
- Expenses incurred for addiction programs
Besides the general medical and dental expenses, these are some lesser-known bills that are also eligible for a tax deduction.
Home Improvement for A Disabled Person
In case you incur capital expenses on renovating your home to support a disabled person, the amount is eligible for deductions. Things like adding supportive bars, making a ramp for wheelchair mobility, and changing kitchen cabinets for easy access, are some examples of this kind of renovation. However, there are certain conditions about this deduction, so consult with your tax expert before filing.
Meal & Lodging for Medical Care
If you visit a place far away from home solely to receive medical care, your meal and lodging expenses can be tax deductible. However, the stay cannot be a luxurious one, and you cannot claim a return if it's a vacation or a recreational outing.
If someone donated an organ to you, your spouse, or your dependents, you can file a return for the amounts you spent towards taking care of the donor. As a donor, if you received medical expenses for taking care of yourself, that amount is deductible too.
Which Medical Expenses Are Not Qualified for Tax Deduction?
If you have been reimbursed by your health insurance provider, or it was paid off by the insurance, you cannot claim a deduction on it.
Tax deductions are not available for purchases of over-the-counter medications, cosmetic products, toiletries, and expenses of cosmetic surgery.
Tips to Claim Medical Bill Payment Deduction
Maintain an organized record of receipts for all the visits to the doctor, hospital bills, medical equipment charges, etc. When you preserve the receipts, tax filing becomes easier, and you can make sure you're not missing out on filing any expenses.
Don't opt for the standard deduction right away. You first have to analyze which is more – the standard deduction or the itemized deduction. If you find the latter is higher, go for itemized deduction only, as you'll be eligible for a higher tax return and save some bucks. Itemizing can be complex and time-consuming, but taking professional help would sort out the issue quickly.
Consider State Threshold
The IRS-levied threshold for medical bill deduction is 7.5% of your AGI, but your state could offer a lower threshold. The exact number can vary from state to state. If you want to save some money in taxes, be sure to check your state's tax rules. This way, you can get a significant amount of deduction on your state return.
Get Professional Help
To make tax filing stress-free, you can hire a tax professional who will take care of the process on your behalf. At Accountants Now, our experts will make sure you get a deduction on all applicable medical expenses. To discuss this further, feel free to reach out to us.