How to Get Tax Breaks On Your Medical Expenses

Many people don't realize that they can list medical expenditures as deductions on their tax returns. Even those who do deduct medical expenses often don't realize that payments for expenses that might not covered by medical insurance--like glasses, contact lenses, and massage therapy-- may be deductible as well. Here's some advice on how to lower your bill to Uncle Sam using your routine medical expenses.

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• receipts for all medical expenditures
• health insurance (optional)
• a health-insurance reimbursement fund (optional)

1. If you have health insurance through your employer, check your pay stub or consult someone in your personnel office to make sure that your premiums are being deducted from your salary on a pre-tax basis. When your premiums are deducted on a pre-tax basis, the amount you pay for your insurance isn't included in your taxable income. Since your health insurance may cost you hundreds or even thousands of dollars a year, having your premiums deducted pre-tax could save you a significant amount of money.

2. Keep receipts for all medical expenses, including co-payments and payments for expenses that your insurance may not cover. You can deduct your medical expenses when you prepare your tax form as long as your medical expenses total at least 7.5% of your adjustable gross income. However, you can't deduct the entirety of your medical expenses. You can only deduct that portion that exceeds 7.5% of your adjustable gross income.

3. Check to see if your employer offers a flexible spending account or health care reimbursement account. These accounts allow you to set aside a certain amount of your salary on a pre-tax basis to pay for allowable medical expenses. Thus, you don't pay taxes on any medical expenses that you pay for out of the account. The advantage is that you don't pay tax even if your annual medical expenses don't exceed 7.5% of your adjustable gross income.

4. Consult IRS publication 502 which lists medical expenses that are tax deductible and expenses that are not deductible. You may be surprised to discover what expenses you are allowed to deduct and/or pay for out a flexible spending account. For instance, you may deduct payments for eyeglasses, contact lenses and contact lens solutions, false teeth, books in braille, acupuncture, bandages, birth control, crutches, telecommunications devices for the deaf, and more. Under some circumstances, you can deduct expenses for weight loss programs and health club membership provided that you are participating as a result of a diagnosed illness such as obesity or heart disease.

Tips & Warnings

• Make sure your health insurance premiums are being deducted from your pay on a pre-tax basis.
• Keep receipts for all medical expenses so that you'll be able to tally them when you do your taxes. Remember to hold onto your receipts after filing your tax form in case of an audit.
• If your employer offers a flexible spending account or health care reimbursement account, be sure to take advantage of it.
• Consult IRS publication 502 and the IRS website for information on qualified expenses.
• When setting aside a portion of your salary for deposit into a flexible spending account, make sure that you do not overestimate your prospective medical expenses for the year. If you do not use up all the funds in your account by the end of the year, you may be forced to forfeit them.

Resources

• IRS Website

[pennynickols]

on 10/13/2009 Thanks for writing, "How to Get Tax Breaks On Your Medical Expenses." Your article is a good primer for taking medical expenses as tax deductions.