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Health and Medical Tax Topics

Medical Expense Deductions: What You Need to Know

It can be hard to plan ahead when there are medical emergencies. Learn about tax-deductible reliefs for your health & medical expenses, and how to take advantage of them.

Health and medical expenses can add up quickly and eat at your budget. It can be really hard to plan ahead, especially when unexpected emergencies occur that might not be covered by your insurance. 

However, there is some relief. Many of these expenses are partly tax-deductible and it is important to know how to take advantage of these deductions, from what is deductible to how you need to file in order to claim them.

Premium Tax Credit and Health Insurance Coverage Penalty

The good news is – under tax reform, the penalty for not having health insurance is $0 for all taxpayers. This means Forms 1095-B and 1095-C that provide verification of coverage are no longer necessary. Also, Form 8965 (Health Coverage Exemption) is no longer necessary if you don’t have coverage. There is still a valid prepayment of a tax credit when you purchase health insurance through the state health insurance marketplaces. You must have Form 1095-A and file a Form 8962, Premium Tax Credit, to reconcile your pre-payments of the credit with your actual credit amount so you can complete your 2019 tax return if you do use a government-backed Marketplace for your health insurance.

Be careful, many states are considering instituting a penalty, or already have, if you have no health insurance coverage. Be sure to check your state for any possible penalty.

Deductions

Health Savings Accounts (HSA)

You do not need to itemize deductions to a claim a deduction for contributing to the Health Saving Account (HSA). What you do need to do is keep track of total medical expenses paid. As long as your payments from an HSA are used to pay for health & medical services, you won’t be taxed on the money you use.

Itemized Medical Expenses

In general medical expenses include (but are not limited to):

  • Medical Copays

  • Prescriptions & medical devices

  • Payments made for a treatment facility

  • Payments for in-hospital care, including lodging and meals

  • Payments for in-home health care and visiting health professionals

  • Dental expenses including braces and dentures

  • Eye exams, prescription glasses, and contact lenses and associated cleaning supplies

  • 20 cents per mile for all miles driven for medical purposes including; back and forth for office visits, medical tests, prescriptions, etc.

  • Cost of health, dental, and vision policies

This list is not exhaustive but does give a general idea of the items allowable as deductions. In general, so long as it is legal in the United States and promotes and maintains the health and wellbeing of a taxpayer, it is considered a valid health deduction. IRS Publication 502, gives a very in-depth list of deductible and nondeductible expenses.

Long-Term Care

The cost of qualified long-term care services can often be included as medical expenses. This would include the cost of a visiting nurse, cost of medical home renovations, daily treatments, and other such necessary expenditures. In addition, a portion of your long-term care insurance premiums is deductible as a health insurance payment.

Tip/Help

Don’t forget: you no longer have to pay a penalty if you don’t have health insurance for you or your family members.

Maximize your Deductions

Overlooked Deductions

There are many medical expenses that are often overlooked and may be included as a tax deduction.  This includes items such as; birth control pills, dental expenses, items such as glasses, artificial limbs or hearing aids, even smoking cessation drugs or programs.

Weight Control Treatment

In general, weight loss treatments are not considered deductible (things like gym memberships or gym equipment). However, for diagnosed illnesses such as obesity, certain prescribed programs to treat or cure certain diseases are allowed. This does not mean payment of certain types of food or health club dues is valid expenses.

 

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