How Much Medical Are You Allowed to Claim on Taxes?
The U.S. tax code sets no maximum dollar amount on the income tax deduction for medical expenses. But you can't use deductions to reduce your taxable income any lower than zero, so that limits the amount any individual taxpayer can claim. Further, before you can take any medical deduction, your total medical expenses must add up to more than 7.5 percent of your federal adjusted gross income.
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Ground Rules
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You can claim a deduction for medical and dental expenses only if you itemize your tax deductions. According to the Internal Revenue Service, an expense is deductible if it goes toward diagnosis, treatment or prevention of illness or injury. Expenses for general wellness, such as vitamins or health-club dues, aren't deductible. And you can claim expenses only for the year in which you paid them, not the year you received services or treatment. For example, if you had surgery in December 2011 but didn't receive and pay the bill until the following February, then you could have claimed the expenses from that bill only on your 2012 return.
AGI Threshold
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When you itemize your tax deductions, you list them on IRS Schedule A, which gets attached to your tax return. In the first section of Schedule A, you enter the total amount of your deductible medical and dental expenses, then you subtract 7.5 percent of your adjusted gross income, or AGI. Say you had an AGI of $55,000 and medical bills of $6,200. First, calculate 7.5 percent of $55,000, which gives you $4,125. Now subtract that from your medical expenses: $6,200 minus $4,125 equals a medical expenses deduction of $2,075. The 7.5 percent threshold means that unless your medical bills actually exceed your income, you won't be able to deduct all your medical expenses.
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Maximum Deduction
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Of course, it's certainly possible for your medical expenses to exceed your income. Say you were seriously ill and unable to work for most of the year. Your AGI for the year was $8,000, but you paid $10,000 in medical bills, perhaps out of savings or with credit cards. Taking 7.5 percent of $8,000 gives you $600, so your allowable medical deduction would be $9,400 -- which is still more than you made. However, you can't reduce your taxable income to less than zero. On your tax return, when you subtract your deductions and exemptions from your AGI, if the result is less than zero, then you must enter zero. Even if you had no other deductions and claimed no exemptions, the most you could claim was $8,000 -- 100 percent of your AGI.
AMT Exception
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The alternative minimum tax is supposed to prevent people at higher incomes from using deductions to completely eliminate their tax liability. You'll find out when you fill out your tax return whether you fall under the "AMT." If you do, you must calculate your taxes using a separate set of rules. Under AMT rules, medical expenses are deductible only if they exceed 10 percent of your AGI.
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