As medical costs continue to soar, it might be a good idea to reconsider whether or not you might benefit from a medical expense deduction. If so, you’ll want to start keeping track of your medical expenses. Attached is a list of many deductible medical expenses, some of which you may not have realized were allowable as medical deductions. This list can help you get an idea as to how much you are spending on unreimbursed medical expenses. Keep in mind that only expenses that aren’t reimbursed are deductible.
To receive a tax benefit from unreimbursed medical expenses, you’ll need to jump two hurdles. If your unreimbursed medical expenses will exceed these hurdles, you may benefit from keeping up with them. The first hurdle is the 10% (7.5% if you or your spouse are age 65 by the end of the year) of your Adjusted Gross Income (AGI) hurdle. Only unreimbursed medical expenses exceeding this hurdle are deductible as an itemized deduction. You can use the following chart to get a rough idea as to whether your unreimbursed medical expenses will get over this hurdle.
10% Limitation that 7.5% Limitation (Age 65) AGI Expenses Must Exceed that Expenses Exceed
$ 80,000–99,999 $ 8,000–10,000 $ 6,000–7,500
$100,000–119,999 $10,000–12,000 $ 7,500–9,000
$120,000–150,000 $12,000–15,000 $ 9,000–11,250
$150,000–250,000 $15,000–25,000 $ 11,250–18,750
The next hurdle is the itemized deduction hurdle. Here, medical expenses that exceed the 10% or 7.5% limit, as applicable, are combined with other itemized deductions (such as, interest, taxes, and charitable contributions) to determine total itemized deductions. You’ll benefit from your itemized deductions only to the extent they total more than your standard deduction for the year. The 2014 standard deductions are generally as follows:
Filing Status Basic Standard Deduction
Married filing jointly $ 12,400
Single or married filing separately $ 6,200
Head of household $ 9,100
If you are married, your standard deduction is increased by $1,200 for each spouse who is blind. It’s increased by another $1,200 for each spouse who is age 65 or over. If you are single, your standard deduction is increased by $1,550 if you are blind/age 65 or over.
Finally, high-income taxpayers are subject to the phaseout rules, which cause a taxpayer to lose itemized deductions. For 2014, the phaseout begins when AGI exceeds $$305,050 for a married filing joint ($152,525 for married filing separate) filers, $254,200 for single filers, and $279,650 for head of household filers. Because the mechanics of this limitation is complex, we will not try to explain it here. If your AGI exceeds these amounts, you may want to give us a call. To the extent that you have control over the timing of medical expenses or other itemized deductions, you might consider bunching deductions into a lower income year in order to lose fewer dollars to the phaseout.
Bottom Line: If it looks like your unreimbursed medical expenses will be high enough to jump all these hurdles, it’s time to start keeping up with your receipts. Please give us a call if you have questions or want to know more about medical deductions.
Deductible Medical Expenses
Abortion (legal)
Acupuncture
Adopted child, medical expenses of
Alcoholism, treatment of
Ambulance
Animals (guide animals, seeing-eye dogs,
hearing aid animals, etc.)
Attendant for blind or deaf student
Autoette (three-wheeled vehicle for the disabled)
Birth control pills
Body scans (full-body electronic scans)
Breast pumps and related equipment
Breast reconstructive surgery following
mastectomy for cancer treatment
Capital improvements to home prescribed for
medical reasons (only excess of cost over
increase in home’s value)
Car with handicap controls or equipped to
accommodate passengers in wheelchairs (to
the extent of the cost of special controls and
equipment)
Childbirth preparation classes (mother)
Chiropractors
Christian Science treatment
Contact lenses
Contraceptives, prescriptive
Cosmetic surgery (only for procedures that
correct a congenital defect, personal injury, or
a disfiguring disease)
Crutches
Dental fees
Dentures
Diabetic supplies
Diagnostic fees
Diapers (disposable), used because of severe
neurological disease
Doctors
Domestic aid (type that would be rendered by a
nurse)
Drug addiction, treatment for
Drugs, prescription (including alleviation of
nicotine withdrawal)
Dyslexia, language training
Egg donor costs, including legal fees, hospital,
transportation
Eye examination
Fertility enhancement
Fluoride device (on advice of dentist)
Glasses
Health club dues (prescribed by physician for a
medical condition)
Health maintenance organization
Hearing aid
Hospital care, in-patient
Hospital services
Insulin
Insurance premiums (medical—except coverage
of unnecessary cosmetic surgery)
Iron lung
Laboratory fees
Laetrile (legal use)
Laser eye surgery to correct vision
Lead paint, removal of
Limbs, artificial
Lodging (limit of $50 per night per person)
Long-term care services for the chronically ill
Medicare premiums (Parts A, B, and D)
Nursing home (medical reasons)
Nursing services
Obstetrical expenses
Operations (legal—except unnecessary cosmetic
surgery)
Optometrists
Orthodontia
Orthopedic shoes (excess cost)
Osteopaths
Oxygen equipment for breathing difficulty
Personal products (for the treatment of acne,
arthritis, dehydration, incontinence,
indigestion, sinus problems, and support for
injured or weakened body parts)
Physical examination
Pregnancy test kits
Prosthesis
Psychiatric care
Psychologists
Psychotherapists
Radial keratotomy (corrective eye surgery)
Reclining chair (cardiac patient)
Remedial reading
Retirement home, lifetime medical care
Sanitarium rest home, cost of if for medical,
educational, or rehabilitative reasons
Schools to alleviate medical condition
Sexual dysfunction, treatment of
Smoking-cessation programs
Sterilization operation (legal)
Telephone, specially equipped for the deaf
Television closed caption decoder for the deaf
Transplant, donor’s expenses
Transportation, essentially and primarily for
medical care
Vasectomy (legal) and reversal
Visual alert system for the hearing impaired
Weight reduction program to treat obesity or a
specific problem directly associated to
excessive weight
Wheelchair
X-ray
Abacoa CPA's
(561) 331-0744