Tax Time: Whether or Not to Itemize Your Medical Expenses
Making the most of your tax return
Let’s face it—preparing your tax return is not something you look forward to, especially since there are numerous changes to the tax laws that begin in the 2018 filing season.
Like many people on a fixed income, you’ve probably gotten into the habit of claiming the standard deduction because you receive a larger standard deduction on your taxes if you’re over 65 and/or blind. However, keep in mind the new standard deductions have almost doubled for single filers and married couples.
The good news is that medical expense deductions used by more than 5 million taxpayers age 65 and over with high health costs will remain. For the 2018 tax-filing season you can deduct medical and dental expenses that exceed 7.5% of your adjusted gross income. It also grants the 7.5% level retroactively for 2017 filers. So, depending on the amount of your medical expenses, you might want to consider itemizing those deductions.
Whether or not you have significant medical expenses, you can read about eligible medical deductions here and consider which method would benefit you more. Several of the most common eligible medical expenses are listed below to help you get started:
What You Can Deduct
- Any premiums you pay for Medicare Part A, Part B, a Medigap policy, a Medicare Advantage Plan or a Part D plan are deductible.
- As long as you pay your premiums, they are deductible. It doesn’t matter whether they’re paid directly from your Social Security benefits or out-of-pocket. Costs paid by Medicare, employers, or other third parties cannot be deducted.
- Premiums for qualified long-term care coverage are covered up to a certain limit
Deductibles, Copayments and Coinsurance
- If your plan has a deductible, the amount you pay out-of-pocket before the plan pays its share of the cost can be counted as a medical deduction.
- The same is true for any copays or coinsurance you may pay for your medications.
- You can deduct the costs of hearing aids, eyeglasses/contact lenses, and dental treatments
- Any costs you paid for inpatient care at a hospital or similar institution, including meals, are eligible
- Special equipment is deductible, such as an artificial limb or a wheelchair
- Various expenses paid for transportation primarily for, and essential to, medical care are deductible.
Expenses Paid for Relatives
- If you paid health insurance premiums or uninsured medical expenses for a qualified dependent, these are deductible.
For many, figuring out your income tax return can be frustrating and confusing, so it may be advisable to contact a tax professional. In fact, a tax professional will work with you to determine if certain expenses are eligible for deduction, and whether itemizing your deductions will be better for you than claiming the standard deduction. If you find that you didn’t include certain deductions on previous itemized returns, you may be able to get a refund on those tax savings by filing amended tax returns for up to 3 prior years.
For further information, see IRS Publication 502 “Medical and Dental Expenses,” available at https://www.irs.gov/publications/p502.