By Bill Bischoff
While the federal income tax rules for deducting medical expenses should be familiar to most filers, it’s important to brush up at tax time.
Medical expense deduction basics
Before 2013, you could claim an itemized deduction for medical, dental, and vision-care expenses paid for you, your spouse, and your dependents, to the extent those expenses exceeded 7.5% of your adjusted gross income (AGI). AGI is the number at the bottom of Page 1 of your Form 1040. It includes all taxable income items and selected write-offs such as the ones for alimony paid and moving expenses.
The 7.5%-of-AGI hurdle was hard enough to clear. Now, thanks to the Obamacare legislation, an even higher 10%-of-AGI threshold applies to most folks.
However, if either you or your spouse was age 65 or older as of Dec. 31, 2013, the 10%-of-AGI threshold will not take effect until 2017. Filing a joint return is not necessary to take advantage of this break based on the age of your spouse. Until 2017, the familiar 7.5%-of-AGI threshold will continue to apply to you.
If you or your spouse turned age 65 in 2014, the 10%-of-AGI threshold applied for 2013 but will not apply for 2014-2016 (the old-law 7.5%-of-AGI threshold still applies for those years).
If you or your spouse turned 65 in 2015, the 10%-of-AGI threshold applied for 2013 and 2014 but will not apply for 2015 or 2016 (the 7.5%-of-AGI threshold still applies for those years).
If you or your spouse will turn 65 in 2016, the 10%-of-AGI threshold applies for 2013- 2015 but not for 2016 (the old-law 7.5%-of-AGI threshold still applies for that year).
After 2016, the 10%-of-AGI threshold will apply to everybody, regardless of age.
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Don’t forget expenses paid for supported relatives
Do you pay medical expenses for a dependent parent, grandparent or adult child? If so, you can add those expenses to your own for itemized deduction purposes.
For a person to be your dependent, you must pay over half of his or her support for the year. If you pass the support test, you can add medical expenses you paid for the supported person to your own expenses for purposes of clearing the 10%-of-AGI (or 7.5% of AGI, whichever applies) hurdle for medical expense write-offs. This is true even if you cannot claim a dependent exemption deduction for the supported person on your return because he or she had too much income. For 2015, you cannot claim a dependent exemption deduction if the supported person had over $4,000 of gross income or files a joint return for that year.
Key point: To claim a deduction, you must directly pay the medical service provider. You cannot deduct payments to your relative, even if they were used to cover medical expenses.
Remember Medicare and long-term care insurance premiums
For itemized medical expense deduction purposes, you can include premiums paid for medical, dental, and vision-care insurance.
You can also include premiums paid for Medicare Parts A, B, and D coverage and for Medigap policies. Finally, you can also include premiums paid for qualified long-term care insurance policies, up to the age-based limits listed below (these limits are adjusted annually for inflation).
|Age at Dec. 31, 2015||Max amount treated as medical expense|
|40 or under||$380|
|41 to 50||$710|
|51 to 60||$1,430|
|61 to 70||$3,800|
Itemizing versus claiming standard deduction
You can claim either the applicable standard deduction or itemized deductions, but not both. If you have enough itemized deductions to exceed your standard deduction amount, you should itemize using Schedule A (Itemized Deductions), which is filed with your Form 1040.
If you don’t have enough itemized write-offs, claim the standard deduction. For 2015, the standard deduction amounts are $6,300 for singles, $12,600 for married joint-filing couples, $9,250 for heads of households, and $6,300 for married individuals who file separately.
Where to claim your rightful deductions
Deduct medical, dental, and vision care expenses on Line 1 of Schedule A.
Lines 2 and 3 are used to calculate the impact of the percent-of-AGI deduction threshold.
IRS-approved medical expenses
Here’s an alphabetical list of commonly encountered costs that count as medical expenses for itemized medical expense deduction purposes.
* Artificial limb.
* Artificial teeth.
* Braille books and magazines.
* Car — cost of special equipment so disabled person can drive.
* Christian Science practitioner.
* Contact lenses plus wetting and cleaning solutions.
* Dental care.
* Diagnostic devices.
* Drugs — prescription only except for insulin.
* Eye surgery.
* Guide dog.
* Hearing aid.
* Home improvements for medical purposes to extent they don’t add to the value of your home.
* Insurance premiums for health coverage including medical, dental, and vision-care insurance, premiums for Medicare insurance, and age-based premiums for qualified long-term care insurance.
* Laboratory fees.
* Lifetime care fees — percentage of fees paid under lifetime contract with a continuing care retirement community (CCRC).
* Long-term care services.
* Meals — while staying in hospital or similar facility.
* Medicare insurance premiums.
* Nursing home.
* Nursing services.
* Operation (i.e., surgery).
* Psychiatric care.
* Stop smoking program.
* Telephone — cost of special equipment for hearing impaired.
* Television — cost of special equipment to display subtitles for hearing impaired.
* Car trips to receive medical care (23 cents per mile for 2015).
* Weight loss program — if part of treatment for specific disease or condition, such as obesity.
* Wig — if hair is lost due to medical condition or treatment.
Source: IRS Publication 502 (Medical and Dental Expenses).