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Peacock & French CPAs
Mar 01, 2024

Among the myriad of deductions available, medical expenses can be a significant area where taxpayers may find relief. However, navigating the complex landscape of tax laws pertaining to medical expense deductions requires a thorough understanding of qualifications, limitations, and other pertinent details that most taxpayers may not be aware of. Keep reading to learn what you should know about medical expense deductions.

With this year’s tax season well underway, individuals and families are diligently gathering their financial documents, ensuring they maximize their deductions and minimize their tax liabilities. Among the myriad of deductions available, medical expenses can be a significant area where taxpayers may find relief. However, navigating the complex landscape of tax laws pertaining to medical expense deductions requires a thorough understanding of qualifications, limitations, and other pertinent details that most taxpayers may not be aware of. Keep reading to learn what you should know about medical expense deductions, so that you can ensure you’re claiming these deductions correctly and getting the most out of them.

Qualifications for Medical Expense Deductions

The Internal Revenue Service (IRS) allows taxpayers to deduct qualifying medical expenses that exceed a certain threshold of their adjusted gross income (AGI). To qualify for this deduction, medical expenses must meet the following criteria:

• Necessary for Medical Care: The expenses incurred must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any part or function of the body.
• Qualified Medical Expenses: Eligible expenses may include payments for doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners. Additionally, costs for prescription medications, medical supplies, and necessary medical equipment are also deductible.
• Not Reimbursed: Expenses that have been reimbursed by insurance or any other source are not eligible for deduction.
• Exceeding Threshold: Taxpayers can only deduct medical expenses that exceed 7.5% of their AGI. For example, if an individual's AGI is $50,000, only medical expenses exceeding $3,750 ($50,000 x 7.5%) would be deductible.

Limitations on Medical Expense Deductions

While medical expenses can provide valuable tax relief, there are certain limitations that taxpayers must be aware of:

• Itemization Requirement: To claim medical expense deductions, taxpayers must itemize their deductions on Schedule A of Form 1040. This means forgoing the standard deduction, which may not be beneficial for all taxpayers.
• Non-Qualifying Expenses: Not all medical expenses are deductible. Cosmetic procedures, over-the-counter medications (unless prescribed by a doctor), and general health and wellness expenses such as gym memberships are typically not eligible for deduction.
• Eligible Dependents: Taxpayers can include medical expenses for themselves, their spouse, and dependents. However, if the dependent has their own income and files their own tax return, they cannot be claimed as a dependent for medical expense deduction purposes.
• Tax Planning Considerations: Timing of medical expenses can impact deduction eligibility. Taxpayers may choose to bunch medical expenses into one year to exceed the AGI threshold and maximize deductions in that year.

Other Details Worth Noting

In addition to the qualifications and limitations outlined above, there are other details regarding medical expense deductions that taxpayers may not be familiar with:

• Travel Expenses: Transportation costs related to medical care, such as mileage, parking fees, tolls, and public transportation fares, can be deductible. This includes travel to and from doctor appointments, medical treatments, and the pharmacy. However, claiming travel expenses can get tricky, and because this deduction can be easily abused, the IRS examines these claims very carefully. It’s essential that you claim any medical-related travel expenses correctly to avoid future fines.
• Medical Conferences and Workshops: Expenses related to attending medical conferences, workshops, and seminars that are primarily for the purpose of medical care may be deductible, including registration fees, transportation, and lodging.
• Home Improvements: Certain home improvements made for medical reasons, such as installing ramps, widening doorways for wheelchair access, or modifying bathrooms, may qualify as medical expenses and be deductible. Again, these types of deductions must be handled carefully, and it’s important that you are able to prove the medical necessity of these changes if you hope to claim them as a tax deduction on your return.
• Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs): Contributions to HSAs and FSAs are made on a pre-tax basis and can be used to pay for qualified medical expenses, providing additional tax benefits for taxpayers.

Seek Professional Guidance

Navigating the complexities of tax laws pertaining to medical expense deductions can be daunting for many taxpayers. Our team here at Peacock & French CPAs are here to provide expert guidance and assistance in understanding your eligibility for medical expense deductions and maximizing your tax savings. Contact us today to schedule a consultation and ensure you are taking full advantage of available deductions while staying compliant with IRS regulations. Don't let medical expenses add unnecessary strain to your tax burden; let us help you navigate the complexities of the tax code with confidence and ease.