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Medical and dental expenses

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📚 Key IRS Points (6 Things to Know)

1. Medical expenses deduction limit

   You may deduct only the amount by which your clients' total medical care expenses for the year exceed 7.5 percent of adjusted gross income. You do this calculation on Form 1040, Schedule A in computing the amount deductible.

2. Only include expenses paid during the year (reimbursements reduce the total)

   You can only include the medical expenses paid during the year. Total medical expenses for the year must be reduced by any reimbursement. It makes no difference if your client received the reimbursement or if it was paid directly to the doctor or hospital.

3. Who you can include (filer, spouse, dependents)

   You may include qualified medical expenses your clients paid for the filer, spouse, and dependents, including a person claimed as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses paid for someone who would have qualified as your clients' dependent except that the person did not meet the gross income or joint return test.

4. What qualifies as a medical expense (and prescription drug rules)

   A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription except for insulin.

5. Transportation costs for medical care

   You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If your clients used a car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method, you may include tolls and parking fees.

6. Tax-free distributions/withdrawals (if used for qualified medical expenses)

   Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if your clients paid qualified medical expenses.

Tags: federal,form