If you’re working on your federal income tax return right now, you know that tracking various expenses and deductions can be a hassle. But because deductions can save you a significant amount on your taxes due, it’s important to claim everything that you can. Those of you who have incurred out-of-pocket medical expenses will be happy to learn that you can sometimes deduct those on your tax return, but you have to take the right steps to do so.
First, understand what you can and can’t claim as a medical expense deduction. You will need to add up all of your expenses from the previous year, and then you can claim those that exceed 7.5 percent of your adjusted gross income. If you do have expenses over that amount, file IRS Form 1040 and attach a Schedule A listing your deductions.
As for the deductions themselves, you can claim the following as unreimbursed medical expenses:
- Co-payments and deductibles
- Vision exams and corrective lenses
- Dental exams and procedures
- Hearing exams and hearing aids
- Payments for your prescription medications
- The cost of insulin products and other products for managing diabetes
- The cost of necessary medical devices
- Expenses incurred when traveling to receive medical care
“Unreimbursed” means that you paid the amount yourself, and your healthcare plan did not reimburse you for it. So if you submitted the expense to your healthcare plan administrator and they sent you a check in return, you can’t claim that expense on your taxes.
If you get started and set up a filing system now, tracking your expenses will become much easier at tax time next year. Use a single credit card to make all medical payments, so that you can simply review your card statements next spring. Or, dedicate a separate file in your records to hold paper receipts.
There’s one more bonus to tracking your out-of-pocket medical spending. Having this information handy during open enrollment season can help you determine whether your healthcare plan is working well for you. And if you feel that your expenses exceed your expectations, or you’re dissatisfied with your healthcare plan for any other reason, give us a call. We can help you compare all of the plans available to you, so that you can choose one that best suits your needs and budget.
