Tax Breaks for Medical Retirees
You can deduct medical expenses for yourself, your spouse and your dependents. To do so, you can itemize medical deductions along with other common deductions, such as interest paid on home mortgage, charity contributions, state and local income tax and business use of your home. However, there is more than one method to claiming a tax deduction on medical expenses, so use the method that benefits you the most. You can only deduct medical expenses exceeding 7.5 percent of you adjusted gross income, or AGI.
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Credit for the Elderly or the Disabled
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If you reached 65 or you retired on permanent disability before the end of the year, you may qualify for the Credit for the Elderly or the Disabled deduction. You must have received taxable disability income at the beginning of the year and reached your mandatory retirement age before the end of year. You must also be a U.S. citizen or a resident alien to claim this credit. You may not claim this deduction if your adjusted gross income exceeds $12,500 if you're single, or $25,000 if you're married. Income from nontaxable social security and pensions must be between $3,750 and $7,500 for eligibility for this credit.
Itemized Medical Expenses
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If you itemize your medical deductions on Schedule A, only the expenses exceeding 7.5 percent of your adjusted gross income is deductible. These deductions can include expenses paid for ambulance, medical and dental services, diagnostic blood sugar test kits, hearing aids, wheelchairs and any supplementary costs, such as batteries and maintenance. Costs for medical procedures, surgeries, operations, lab tests, hospital care, physical therapy and psychiatric treatment are deductible. In addition, fees paid for services from eye doctors, medical practitioners, psychologists, psychiatrists, dentists and osteopaths are deductible, as well as prescriptions, insulin, costs for nursing home medical care and lab fees. On the other hand, over-the-counter medications are not deductible.
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Capital Medical Expenses
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Modifications to your home or property to accommodate disability or to install medical equipment is tax-deductible. These modifications include the cost of equipment and its installation; making construction ramps and installing safety support bars for access to, from and within the house; widening stairways, doors and hallways; and moving or modifying building fixtures, appliances, cabinetry and outlets. The capital expense must take your home's cost basis into account; any decrease in your home's basis is deductible. The equipment may depreciate over time; operational and maintenance costs for medical equipment is deductible as well.
Medical Insurance
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Premiums paid for medical, dental, hospital and prescription services are tax-deductible, unless it was employer-sponsored and came out as a pre-tax deductions. Fees and copays not covered by insurance are deductible. Premiums paid for long-term care, Medicare Part B and Medicare Part D are deductible.
Medical Travel
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Travel and lodging expenses are deductible, as long as there are no personal elements in the trip. You can deduct up to $50 per night for lodging and the cost of medical meals. As of 2011, you can either claim gas and oil expenses or a standard mileage rate of $0.19 per mile for medical trips.
Standard Deductions
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Use the standard deduction if it is higher than your itemized deductions. As of 2011, the standard deduction is $5,800 for single people and for married people who file separately, $8,500 for heads of household and $11,600 for married couples filing jointly. An additional standard deduction of $1,150 for those who are single and $4,600 for those married applies if you are over 65, blind or both. You can also claim a personal exemption of $3,700 for yourself, your spouse and your dependents.
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