Deducting Medical Expenses

If you plan to claim a deduction for your medical expenses, there are some new rules this year that may affect your tax return. Here are eight things you should know about the medical and dental expense deduction:

  1. Higher limts. Starting in 2013, the amount of allowable medical expenses you must exceed before you can claim a deduction is 10 percent of your adjusted gross income. The threshold was 7.5 percent of income in prior years. That means that if your total income is $100,000, you need to have medical expenses out of pocket of more than $10,000, and you can only deduct the amount over $10,000.
  2. Temporary exception for age 65. The income threshold is still 7.5 percent of your income if you or your spouse is age 65 or older. This exception will apply through Dec. 31, 2016. In the above example, that means you would need to have out of pocket expenses of more than $7500 to use any of them.
  3. You must itemize. You can only claim your medical and dental expenses if you itemize deductions on your federal tax return. You can’t claim these expenses if you take the standard deduction.
  4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment. If you paid by credit card, the date you put the charge on the card is considered the date you paid, even if you didn’t pay off the credit card the same year.
  5. Costs to include. You can include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.
  6. Expenses that qualify. You can include the costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums that you pay for policies that cover medical care qualifies, as does the cost of some long-term care insurance. The cost of prescription drugs and insulin also qualify. Vitamins don’t qualify. Some things, like a hot tub or a weight loss program, might qualify if a doctor recommends it to treat a health problem.
  7. Travel costs count. You may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. If you use your car, you can deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.
  8. No double benefit. You can’t claim a tax deduction for medical and dental expenses you paid with funds from your Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free.

When you’re adding up your receipts, be sure to include dental, vision and all your prescription costs. Many people with insurance don’t pay much out of pocket for medical, but dental can add up fast. Also remember things like batteries for hearing aids and test strips for diabetes, those are deductible as well.