Do you have out-of-pocket medical expenses?

If you’re looking for ways to lower your tax bill, consider claiming medical expenses on your return. That’s because the IRS allows for unreimbursed medical bills to be deducted at the end of the year. But, to do this, the IRS sets out specific guidelines that need to be followed

Since these rules can be confusing, we’ve outlined everything you should know about claiming medical expenses on your taxes in the helpful guide below.

What You Can’t Claim

If you have medical expenses that were reimbursed by a private insurance carrier or your employer, then they can’t be deducted from your taxes since you’ve already received money back on them. Additionally, any type of non-prescription drug or other health-related purchase will not qualify (for example, things like toothpaste, vitamins, gym memberships, etc.) The IRS also doesn’t allow for cosmetic procedures to be claimed (unless it is required due to health reasons or other noted abnormalities, and at the direction of a medical professional).

What You Can Claim

The IRS issues a comprehensive list of eligible medical expenses. Although there are a number of things to pick from, some of the more uncommon deductible medical expenses include chiropractor treatments (for medical care), contact lenses, acupuncture, etc.

If you’re unsure whether or not a medical expense qualifies, the government lists all of the possible medical expense reasons on its website: here.

How to Claim

To claim a medical expense on your taxes, you will need to list them as an itemized deduction on Schedule A. This is done by filling out Form 1040, which provides the option to itemize expenses or use the standard deduction rate (which is a predetermined amount based on a person’s filing status).

It is important to note that using the standard deduction is only beneficial if the itemized deduction amount is greater than the standard deduction rate. So, be sure to know the totals and pay attention to the totals prior to filing.

If you’ve done this, and determined that itemizing is right for you, fill out IRS Form 1040. On Schedule A, fill in Line 2 with your AGI (adjusted gross income) and the year’s total medical expenses on line 1.

On line 3, enter 7.5% of your AGI. Line 4 will require you to calculate the difference between your claimed expenses on line 2 and 7.5% of your AGI. This amount will then be added to any other itemized deduction and subtracted from your adjusted gross income to reduce tax liability.

Just remember, if the amount is over the standard deduction total for the year, you should reconsider itemizing deductions and instead take the standard amount.

Know Where Payments Are Coming From

The IRS won’t allow medical deductions if the payment for it has been made using money from a flexible spending account or a health savings account. This is because the money in those accounts is already considered ‘tax-advantaged’ and as such, cannot be claimed twice.

Ultimately, to avoid making mistakes when it comes to claiming medical expenses, it’s best to have your invoices, accounts, and deductions reviewed by a professional. At A.P. Accounting and Tax Services, we specialize in taxes and can help you find ways to maximize your return without worrying if what you did was correct. We can even be there to help manage your books throughout the year to ensure that this tax season is stress-free.

So, if you’d be interested in knowing what services would help you maximize your return this year, or what deductions you’d be eligible for, give us a call at 407-328-5001.

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