Is It Worth to Claim Medical Expenses on Taxes in 2024?

When managing your finances, finding ways to save can make a big difference. One area you might not be taking full advantage of is deducting medical expenses on your taxes. In this guide, we’ll explore how medical expense deductions work, what qualifies, and how you can use them to potentially lower your tax bill.

Understanding Medical Expense Deductions

Medical expense deductions can offer significant tax benefits if you have substantial unreimbursed medical costs. However, there are specific rules and thresholds set by the IRS that you need to be aware of.

Thresholds and Eligibility

For tax returns filed in 2024, you can deduct qualified out-of-pocket medical expenses that exceed 7.5% of your adjusted gross income (AGI). This threshold applies to all taxpayers, regardless of age.

For example, if your AGI is $50,000, you can deduct medical expenses that exceed $3,750 (7.5% of $50,000). So, if you had $8,000 in unreimbursed medical expenses, you could potentially deduct $4,250.

Keep in mind that you must itemize your deductions using Schedule A on your tax return to claim medical expenses. This means forgoing the standard deduction. For 2024, the standard deduction amounts are:

• $14,600 for single filers and married individuals filing separately
• $29,200 for married couples filing jointly
• $21,900 for heads of household

Itemizing is beneficial if your total deductions exceed these standard amounts.

Learn more about: Standard Deduction 2024: Guide for Different Filing Status

Qualified Medical Expenses

The IRS defines qualified medical expenses as costs paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any part or function of the body. Eligible expenses include:

• Payments to medical practitioners: Doctors, dentists, psychologists, and other licensed providers.
• Prescription medications and insulin
• Medical equipment and supplies: Wheelchairs, crutches, hearing aids.
• Dental care: Cleanings, fillings, braces.
• Vision care: Eye exams, glasses, contact lenses.
• Premiums for medical and dental insurance: If paid with after-tax dollars.
• Travel costs for medical care: Mileage, parking fees, tolls.

For 2023, the standard mileage rate for medical travel is 22 cents per mile. The IRS will announce the rate for 2024 later, so be sure to check the latest figures when filing your return.

Expenses that generally do not qualify include:

• Cosmetic procedures not medically necessary
• Over-the-counter medicines: Except for insulin and certain other exceptions.
• General health items: Vitamins, health club memberships.
• Expenses reimbursed by insurance or other sources

Tip: For a comprehensive list of eligible expenses, refer to IRS Publication 502.

Claiming the Deduction

To claim medical expense deductions, you need to itemize your deductions on your tax return using Schedule A. This involves listing all your deductible expenses and requires more record-keeping than taking the standard deduction.

Considering Filing Status

Your filing status can affect the benefit of claiming medical expenses. For married couples, filing separately may allow one spouse to deduct significant medical expenses if their individual AGI is lower, thus reducing the 7.5% threshold. However, filing separately can impact other tax benefits, so it’s important to weigh the pros and cons or consult a tax professional.

Documenting Expenses

Keeping detailed records is crucial. Save all receipts, bills, and statements related to your medical expenses. This documentation is essential not only for calculating your deduction but also in case the IRS questions your return.

Timing Your Medical Expenses

If you’re close to the 7.5% threshold, consider timing elective medical procedures or purchases to maximize your deduction. For instance, if you have a costly procedure planned, scheduling it in the same tax year as other significant medical expenses can help you exceed the threshold.

State-Specific Rules

Some states have different rules regarding medical expense deductions, including lower AGI thresholds. Check your state’s tax regulations to see if you can benefit from additional deductions on your state tax return.

Frequently Asked Questions

• Can I Deduct Over-the-Counter Medications?

  Generally, over-the-counter medications are not deductible unless they are insulin or prescribed by a doctor. However, items like crutches, bandages, or diagnostic devices may qualify.

• Are Health Insurance Premiums Deductible?

  Yes, if you pay your health insurance premiums with after-tax dollars, they can be included as medical expenses. However, if your premiums are paid with pre-tax dollars through an employer-sponsored plan, they are not deductible.

• What About Long-Term Care Expenses?

  Costs for long-term care services and premiums for qualified long-term care insurance policies may be deductible, subject to certain limits based on your age.

• Can I Deduct Medical Expenses Paid for a Dependent?

  Yes, you can include medical expenses you paid for a dependent, such as a child or elderly parent, even if they don’t file a tax return.

• How Do Health Savings Accounts (HSAs) Affect Medical Deductions?

  Contributions to HSAs are tax-deductible, and withdrawals used to pay qualified medical expenses are tax-free. However, expenses paid with HSA funds cannot be claimed as itemized deductions.

Tax Tips and Resources

• Understanding Your Filing Status: Knowing whether to file jointly or separately can impact your deductions. Learn more about filing statuses.
• Claiming Dependents: Find out who qualifies as a dependent and how it affects your taxes.
• Maximizing Deductions: Explore other itemized deductions like mortgage interest, state and local taxes, and charitable contributions.
• Tax-Advantaged Accounts: Consider using HSAs or Flexible Spending Accounts (FSAs) to pay for medical expenses with pre-tax dollars.
• Staying Informed: Tax laws can change, so keep up-to-date with IRS announcements and consult IRS Publications for detailed information.

Conclusion

Claiming medical expenses on your taxes can be a valuable way to reduce your taxable income, especially if you’ve had significant medical costs. By understanding the rules and keeping thorough records, you can make informed decisions about whether itemizing deductions is right for you.

Remember, everyone’s tax situation is unique. Consulting a tax professional can help you navigate the specifics and ensure you’re maximizing your benefits.

You May Also Find These Articles Interesting:

• How to Avoid Taxes on Lump Sum Pension Payout
• Guidelines for Tax-Deductible Donations to Charities
• Tax Credit vs. Tax Deduction: Which Is More Beneficial?
• What Is the Additional Medicare Tax for High Earners?

Get Expert Help

Have more questions or need personalized assistance? Reach out to a tax expert today to ensure you’re making the most of your tax situation.