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Medical Expenses Could Get You a Tax Break

by Megan Roth5 min read
What to know about medical expense?
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 It is worth it to take that extra time to tally your medical expenses for the year. This could result in a welcome tax break for you. The cost of health care has just been going up in recent years. According to the Centers for Medicare and Medicaid Services, in 2007, the average amount that a person spent on medical issues was $7,700. By 2012, that figure had gone up to $9,596. And by 2016, the average spend on healthcare was $10,348.

 

 

Tax Cuts & Jobs Act 2017

In December of 2017, the Tax Cuts and Jobs Act was introduced. According to this new law, taxpayers can deduct medical expenses that exceed 7.5% of their adjusted gross income (AGI). And you can also claim these expenses retroactively to 2017. However, this change will only be applicable for 2017 and 2018. In 2019, the threshold for claiming expenses will go back to 10% of your adjusted gross income.

 

tax breaks for your medical expenses
You can get tax breaks for your medical expenses too.

 

 

How to Calculate Your Medical Expenses

You calculate the 7.5% rule by first tallying up all your medical expenses for the year. Then you subtract 7.5% of your AGI from that amount. For example: If your AGI is $65,000 (you can find your AGI on line 37 of Form 1040), then your threshold is $4,875 or 7.5% of your AGI. So, if you have had a total of $10,000 in medical expenses, then your deduction would be $5,125, which is the remainder over the threshold.

 

 

Itemizing Your Deductions

To be able to claim your medical expenses, you need to itemize your deductions. That means you would need to fill in Schedule A of Form 1040. If you are eligible for other itemized deductions, then you can do the whole thing in one go. It’s a painstaking exercise, but worth it in the end. However, you also need to be aware that while itemized deductions will have a lower threshold right now, the Standard Deductions have also almost doubled for 2018. Which means for singles, the standard deductions limit has increased from $6,350 to $12,000. Couples filing jointly will see a jump from $12,700 to $24,000. So if after you itemize your deductions, if it isn’t more than these numbers, then it is better to submit standard deductions in you returns.

 

Whose Medical Expenses Qualify for Deductions

You are allowed to deduct medical expenses that you paid for yourself, your spouse as well as your dependents. You may also be able to file for deductions of those expenses for those who non-dependents under certain circumstances.

 

Medical Expenses Qualify for Deductions
Can medical expenses qualify for deductions?

 

Out-of-pocket, After-Tax Medical Expenses Allowed

Remember, only those medical expenses that are not covered by your medical insurance can be claimed. Additionally, any expenses you paid by utilizing pre-tax money from a flexi-spending account, a health reimbursement arrangement or a health savings account cannot be claimed. You can only deduct your medical expenses for the year that you paid them. So, if you underwent treatment in 2017, but paid the bill in 2018, then you would claim expenses in your 2018 filing.  

 

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