- If your medical expenses exceed 7.5 percent of your adjusted gross income, you are allowed to take an itemized deduction for the amount by which your expenses exceed the threshold. For example, if your adjustable gross income is $55,000 and your medical bills were $6,125, you can take a deduction of $2,000. Qualifying medical expenses can be medical, dental or vision care for you, your spouse or any dependents. Allowable medical services include those to prevent future problems, treat current problems or to alleviate pain. Medical drugs are deductible if they require a prescription. You can also include any costs that you incur traveling to a hospital including tolls, parking fee and mileage. For 2009, mileage is deductible at the rate of $0.24 per mile.
- Health savings accounts are tax-sheltered accounts to save for future medical expenses. In order to be eligible, you must have a high deductible health insurance plan. For 2009, a high deductible is $1,150 for an individual and $2,300 for a family. This amount is adjusted annually. Each year, you can contribute up to a set limit depending on whether your health savings account is for you or for you and your family. For 2009, the limit is $3,000 for an individual account and $5,950 for a family account. You can deduct these contributions as an above-the-line deduction.
- If you are self-employed, in a partnership or you own more than 2 percent of an S corporation, you can deduct the cost of your health insurance policy and the policy for your spouse or dependents. In order to qualify the deduction, the policy must be in the name of the self-employed individual, partnership or business. The maximum deduction depends on the age of those insured. For 2009, the deduction is capped at $310 for individuals under 40, $580 for those between 41 and 50, $1,150 for those between 51 and 60, $3,080 for those between 61 and 70, and $3,850 if you are older than 70. This deduction only affects your income tax; it does not decrease your tax liability for self-employment taxes.
