#MIDDLEBURY #TAXES
by MARK A. BURNS
As we start the new year, and with tax return season rapidly approaching, this might be a good time to address medical expenses and your tax return.
First of all, many people do not get any tax benefit from medical expenses due to the calculation thresholds that need to be overcome. The first one is that you only get a tax deduction for medical expenses to the extent your out-of-pocket medical costs exceed 10 percent of your adjusted gross income. (The 10 percent threshold is reduced to 7.5 percent if you are 65 or older). The second threshold, even if the first test is met, is that you need to itemize deductions on your tax returns (versus taking the standard deduction).
Also, it is important to note that if you are already getting a tax benefit for any medical costs (e.g., pre-tax payroll deductions or paying medical costs out of a tax-favored HSA or FSA account), then you cannot “double dip” and also take a tax deduction on your tax return for those same costs.
Finally, in certain cases, your tax deduction for medical expenses may be limited by the alternative minimum tax calculation or, if your income exceeds certain levels, then your overall itemized deductions (including medical expenses) may be reduced accordingly.
So what types of medical expenses may be tax deductible? Generally all “normal” medical expenses for you, your spouse and your dependents qualify. This includes payments for doctors, hospitals, lab fees, drugs (assuming they are doctor-prescribed and purchased in the U.S.), medical equipment and supplies, transportation (including car mileage) to obtain medical care, dental care, eye care (including glasses or contacts), hearing aids and batteries, premiums for health and “qualified” long-term care insurance (with some dollar limitations), and nursing care (including in-home care).
The following expenses are not deductible as medical expenses: funeral expenses (but may be deductible for estate tax purposes), health club dues (unless related to a specific medical condition), over-the-counter vitamins and supplements (unless recommended by a medical practitioner for a physician-diagnosed medical condition) and teeth whitening (even when performed by a dentist).
Medical expenses are tax deductible in the year they are paid, regardless of when they were incurred, and if you pay with a credit card, the expense is considered paid when it is charged on the credit card, not when the credit card is actually paid. So if you are going to be eligible for a tax deduction for medical expenses in some years, but not others, you may be able to maximize your tax benefits by managing the timing of your payments.
Mark A. Burns, M.B.A., is a C.P.A. with Diversified Financial Solutions PC in Southbury. He can be reached at 203-264-3131 or Mark@DFSPC.biz.
