Medical expenses increase every year in the US and as your family grows or ages you may incur greater medical expenses in your household. Many people do not realize all potential medical deductions. If you have not yet filed your taxes, make sure you take all medical deductions for 2014, which are available to you.
Basic Requirements to Take Medical Deductions
To be eligible to take medical deductions, you must meet the following requirements.
- Your medical and dental expenses must be greater than 10% of your adjusted gross income (AGI).
- If you are a married couple and you or your spouse are 65 years of age or older, your threshold is 7.5% of AGI for the 2014 tax year. The 65+ threshold will increase to 10% beginning in January 1, 2017.
- You must itemize your deductions.
- Your payment for the medical expense must have occurred during the calendar year (Jan 1 to Dec 31, 2014).
- You can only include expenses that you paid directly with after-tax dollars. You cannot count any expenses paid for by your health insurance company or paid out of your health savings account or flex savings account.
Ten Common Medical Tax Deductions
You can deduct medical expenses for every individual listed on your return. In some cases, you can also deduct medical expenses you paid for an elderly parent, even if the parent is not a dependent.
Below is a list of some of common medical expenses you can deduct.
- Health insurance premiums for health, dental, vision or long-term care insurance.
- Medical device purchases not covered by health insurance (for example: eye glasses, contact lenses, hearing aids, etc.)
- Medically necessary costs prescribed by your physician (for example: a whole house humidifier).
- Prescription Drugs. Note: Over-the-counter drugs are not deductible.
- Laser corrective eye surgery
- Medically necessary home improvements (for example: installing ramps, modifying bathrooms, installing a back-up generator for an oxygen-dependent patient). Note: these improvements must be for legitimate health reasons and not for aesthetic or architectural reasons.
- Travel costs to and from medical treatments. In 2014, the allowable mileage rate for medical travel is 23.5 cents per mile.
- Medical conference costs for a conference covering a chronic illness, which afflicts you, your spouse or a dependent. Note: admission and travel to the conference are deductible; but, meals and lodging are not.
- Stop smoking programs
- Weight-loss programs in some cases if deemed medically necessary by your physician.
This list is not inclusive. If you have a question about your specific situation, please contact us.
Not Too Late for Contributions to a 2014 Health Savings Account
Remember that you can deduct contributions to an HSA, even if you do not meet all the requirements to take medical deductions.
To establish an HSA account, you must have a high-deductible health insurance plan (HDHP). For the 2014 tax year, the IRS defines a HDHP as plan with a deductible not less than $1,250 for an individual and not less than $2,500 for a family
If your health plan meets the HDHP definition, you can make a tax-deductible contribution for a 2014 tax filing as follows:
Individuals may contribute up to $3,300
Families may contribute up to $6,550
You can still make a tax-deductible contribution for the 2014 tax year if you make your contribution before April 15, 2015. Note: make sure you inform your financial institution that you want the contribution attributed to the 2014 tax year.
If you need help understanding HDHP’s and HSA’s, please contact us.