Medical expenses can consume part of the budget any year. But many taxpayers want to know, especially during the pandemic: Are medical expenses deductible? Fortunately, if you have medical bills that were not covered by your health insurance, you may be able to claim a deduction for those expenses to reduce your taxes. We will explain what medical expenses are deductible from your taxes, if you qualify and how to claim them.
Are medical expenses deductible?
The IRS (Internal Revenue Service) allows you to deduct unreimbursed expenses for preventive care, treatment, surgery, vision and dental care as qualified medical expenses. You can also deduct unreimbursed expenses for visits to the psychologist and psychiatrist. Unreimbursed expenses for prescription drugs and equipment such as eyeglasses, contact lenses, false teeth and hearing aids are also deductible.
The IRS also allows you to claim travel expenses you pay to obtain medical care, such as car mileage, bus fares, and parking.
Value of the deduction for medical expenses
The value of your medical expense deduction varies because the amount changes based on your income. In 2021, the IRS allows all taxpayers to deduct unreimbursed qualified medical expenses incurred in the year that exceed 7.5% of their Adjusted Gross Income (AGI).
Your Adjusted Gross Income is the sum of all your taxable income, minus any adjustments that apply to that income such as contributions to a traditional IRA and interest paid on student loans.
Also, as a result of the Tax Cuts and Jobs Act of 2017 (TCJA), the standard deduction has almost doubled compared to what it was in 2016. For 2021, the standard deduction for single filers it is $12,550 for single filers and $25,100 for married filers filing jointly. Usually the amount of the standard deduction determines whether you itemize your deductions or claim the standard deduction. Unless your deductions are more than the standard deduction, you usually won’t itemize your deductions, which means you won’t receive deductions for your medical expenses.
Are medical expenses related to the pandemic deductible?
The cost of any treatment related to COVID-19 is deductible as an itemized deduction just like an ordinary unreimbursed medical expense. Health insurance companies, Medicare or Medicaid must cover your COVID-19 treatment, but there may still be patients with certain health insurance paying deductibles or copays. However, many companies have agreed to cover the full cost of COVID-19 treatments, including any deductibles or copays.
If you have any medical treatment or travel expenses related to COVID-19 that have not been reimbursed, these may be deductible if you itemize your deductions.
What medical expenses are deductible?
The IRS allows you to deduct the costs of preventive health care, treatments, surgeries, and dental and vision care as qualified medical expenses. You can also deduct consultations with psychologists and psychiatrists. Prescription drugs and devices such as glasses, contact lenses, dentures and hearing aids are also deductible.
The IRS also allows you to deduct the expenses you pay to get around for medical care, such as your car mileage and bus and parking fees.
What expenses cannot be deducted?
You can’t deduct any medical expenses for which you get reimbursed, for example, from insurance or your employer. Also, the IRS generally denies expenses for cosmetic procedures. You cannot deduct the cost of over-the-counter drugs (except insulin) or other general wellness purchases, such as toothpaste, gym memberships, vitamins or diet foods, over-the-counter nicotine products, or medical expenses paid another year.
Are there any qualified medical expenses related to the pandemic that are not deductible?
No. Right now, all unreimbursed medical expenses incurred as a result of COVID-19 are deductible.
Medical expenses deduction claim
To claim the medical expense deduction, you must itemize your deductions . Opting for the itemized method requires that you not take the standard deduction, so you should only claim the medical expenses deduction if your itemized deductions are more than your standard deduction (TurboTax will do this calculation for you).
If you choose to itemize your deductions, you must use IRS Form 1040 to file your taxes and attach Schedule A .
- On Schedule A, report the total medical expenses you paid during the year on line 1 and your Adjusted Gross Income (from your Form 1040) on line 2.
- Enter 7.5% of your Adjusted Gross Income on line 3.
- Enter the difference between your expenses and 7.5% of your Adjusted Gross Income on line 4.
- The resulting amount on line 4 will be subtracted from your Adjusted Gross Income to reduce your taxable income for the year.
- If this amount, plus any other itemized deductions you claim, is less than your standard deduction, you should not use the itemized method.