Copyright

Medical Expenses: Types & Tax Implications

Instructor: Yuanxin (Amy) Yang Alcocer

Amy has a master's degree in secondary education and has taught math at a public charter high school.

After reading this lesson, you'll learn what types of medical expenses are tax deductible and which ones are not. Also, learn when these medical expenses become tax deductible.

Medical Expenses

Almost everyone has medical expenses throughout the year. Medical expenses are those payments made to hospitals and doctors for health care purposes either for an illness or for routine care. Some people go to their doctor once a year for a wellness preventative visit while others may need more medical care throughout the year especially if they have a medical condition or illness.

Some medical expenses can be deducted from your taxes
medical expenses

Some people have all of their medical costs covered by insurance, but for others, they have to pay a portion of their own medical costs. For example, a person whose insurance only covers 60 percent of medical costs has to pay the remaining 40 percent out of pocket. If this person needs surgery that costs $23,000, then this person needs to pay 40 percent of the cost or $23,000 * 0.40 = $9,200. Medical expenses can add up for some people.

In some cases, deducting these medical expenses can lead to a more favorable tax situation. Let's take a look.

Covered Expenses

According to the IRS, you are allowed to deduct those qualified medical expenses for you, your spouse, and your dependents that exceed 7.5 percent of your adjusted gross income if you itemize your deductions. Remember that everyone can choose to use a standard deduction. This means that if you itemize your deductions and they exceed the standard deduction, then you'll want to take this route. Otherwise, stick with the standard deduction as it will provide the best tax benefit for you.

For example, if you are single, then your standard deduction is $6,350 (tax year 2017). Itemizing your deductions will benefit you only if they exceed this number. This doesn't mean that if you exceed the standard deduction that your qualified and covered medical expenses can be deducted. No. Only those medical expenses that go over 7.5 percent of your adjusted gross income can be deducted.

For example, if your adjusted gross income is $53,237, 7.5 percent of that is $53,237 * 0.075 = $3,992.77. This means that if your medical expenses are less than $3.992.77, then you can't deduct it from your taxes. But if you have medical expenses in excess of $3,992.77, then you can deduct those. So, if your medical expenses are $4,320.00, then you can deduct $4,320.00 - $3,992.77 = $327.23, the amount that goes over the 7.5 percent.

Qualified covered medical expenses that can be deducted include but are not limited to routine doctor visits, hospital stays, alternative treatments, insulin, prescription medications, insurance premiums, and transportation costs to get medical care. What also qualifies are the admission and transportation costs to attend a medical conference regarding you, your spouse's, or your dependent's illness.

Non-Covered Expenses

Not all medical expenses are deductible though. If your medical premiums were taken out by your employer before taxes, then you can't deduct those. Also, any medical costs that are reimbursed to you in one way or another cannot be deducted either. Cosmetic procedures, even if they are medical and require surgery, are typically not deductible or considered a covered medical expense.

Neither are purchases you make for your general health such as toothpaste or gym membership. Even if these are prescribed by a doctor, you cannot deduct these. You also can't deduct non-prescription medicines except for insulin.

Example

Here's an example to show you how this works when the time comes to file the taxes.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account
Support