Are you wondering how much medical expenses are deductible in 2023? Many taxpayers are looking to reduce their tax burden by claiming deductions for their medical expenses, and at how.edu.vn, we’re here to guide you through the process, including understanding the rules for deducting medical expenses, what qualifies, and how to calculate your deduction. We will also discuss strategies to maximize your tax savings and connect you with expert advice. Contact our team of PhDs for personalized guidance on tax planning, financial advice, and expense management, ensuring you make the most of available tax benefits, optimize your financial health, and gain insights into itemized deductions, adjusted gross income, and healthcare costs.
1. Understanding Medical Expense Deductions in 2023
How do medical expense deductions work? Generally, you can deduct medical expenses exceeding 7.5% of your adjusted gross income (AGI) on Schedule A (Form 1040). This includes costs for diagnosis, treatment, and prevention of disease, and for treatments affecting any part or function of the body.
1.1 What Qualifies as a Medical Expense?
Medical expenses encompass a wide range of costs. According to the IRS, these expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They also include the costs of equipment, supplies, and diagnostic devices needed for these purposes. The primary condition is that these expenses must be to alleviate or prevent a physical or mental disability or illness, excluding expenses that are merely beneficial to general health, such as vitamins or a vacation.
Examples of includible medical expenses are:
- Insurance premiums
- Transportation to get medical care
- Qualified long-term care services
- Qualified long-term care insurance contracts
1.2 What Doesn’t Qualify as a Medical Expense?
Not all expenses related to health and wellness can be deducted. The IRS is specific about what it considers eligible. Some common exclusions include:
- Expenses that are merely beneficial to general health (e.g., vitamins or a vacation)
- Cosmetic surgery (unless it is necessary to improve a deformity arising from a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease)
- Controlled substances that aren’t legal under federal law
- Dancing lessons or swimming lessons for general health improvement
- Funeral expenses
- Health club dues
- Nonprescription drugs and medicines (except for insulin)
1.3 Utilizing Publications to Verify Deductible Expenses
To ensure accuracy and compliance with IRS guidelines, it’s recommended to consult IRS Publication 502, which provides detailed information on medical and dental expenses. This resource helps taxpayers understand what expenses can be included in their medical expense deduction and offers clarity on specific situations and requirements.
2. Calculating Your Medical Expense Deduction for 2023
How do you calculate your medical expense deduction? Follow these steps:
- Determine Your Adjusted Gross Income (AGI): Your AGI is your gross income minus certain deductions, such as contributions to traditional IRAs, student loan interest, and others.
- Calculate 7.5% of Your AGI: Multiply your AGI by 0.075. This is the threshold your medical expenses must exceed.
- Total Your Medical Expenses: Add up all eligible medical expenses you paid during the year.
- Subtract 7.5% of AGI from Total Medical Expenses: The result is the amount you can deduct.
Example:
Let’s say your AGI is $60,000. The 7.5% AGI threshold is $4,500 ($60,000 x 0.075). If your total medical expenses are $7,000, you can deduct $2,500 ($7,000 – $4,500).
3. Who Can You Include Medical Expenses For?
Whose medical expenses can you include? You can include medical expenses you pay for yourself, your spouse, and your dependents.
3.1 Spouse
You can include medical expenses you paid for your spouse if you were married either when your spouse received the medical services or when you paid the medical expenses. Even if your spouse received treatment before you were married but you paid for it after getting married, you can include these expenses.
3.2 Dependents
You can include medical expenses for your dependent, whether a qualifying child or a qualifying relative, as long as the person was your dependent either at the time the medical services were provided or when you paid the expenses.
Qualifying Child
A qualifying child must meet several requirements:
- Be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them.
- Be under age 19 at the end of the year (or under age 24 if a full-time student), or any age if permanently and totally disabled.
- Have lived with you for more than half the year.
- Not have provided over half of their own support for the year.
- Not have filed a joint return.
Qualifying Relative
A qualifying relative must:
- Be your son, daughter, stepchild, or foster child, or a descendant of any of them; brother, sister, half-brother, half-sister, or a son or daughter of any of them; father, mother, or an ancestor or sibling of either of them; stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law; or any other person (other than your spouse) who lived with you all year as a member of your household if your relationship didn’t violate local law.
- Not be a qualifying child of any taxpayer for the year.
- Have received over half of their support from you during the year.
3.3 Special Situations
Child of Divorced or Separated Parents
A child of divorced or separated parents can be treated as a dependent of both parents for medical expenses if:
- The child is in the custody of one or both parents for more than half the year.
- The child receives over half of their support during the year from the parents.
- The parents are divorced or legally separated, separated under a written agreement, or live apart at all times during the last 6 months of the year.
Multiple Support Agreement
If you are considered to have provided more than half of a qualifying relative’s support under a multiple support agreement, you can include medical expenses you pay for that person.
Decedent
Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent’s final income tax return. The survivor or personal representative can choose to treat certain expenses paid by the decedent’s estate for the decedent’s medical care as paid by the decedent at the time the medical services were provided.
4. Detailed List of Includible Medical Expenses
What specific medical expenses are includible? Here is an alphabetical list:
4.1 Abortion
You can include the amount you pay for a legal abortion.
4.2 Acupuncture
You can include the amount you pay for acupuncture treatments.
4.3 Alcoholism
Amounts you pay for inpatient treatment at a therapeutic center for alcohol addiction, including meals and lodging, are deductible. Also deductible are transportation costs to and from Alcoholics Anonymous meetings if attendance is pursuant to competent medical advice.
4.4 Ambulance
Ambulance service costs are includible medical expenses.
4.5 Artificial Limb or Teeth
The amount you pay for artificial limbs or teeth is deductible.
4.6 Bandages
The cost of medical supplies such as bandages can be included.
4.7 Birth Control Pills
You can include the amount you pay for birth control pills prescribed by a doctor.
4.8 Body Scan
The cost of an electronic body scan is deductible.
4.9 Braille Books and Magazines
The part of the cost of Braille books and magazines for use by a visually impaired person that is more than the cost of regular printed editions is deductible.
4.10 Breast Pumps and Supplies
The cost of breast pumps and supplies that assist lactation is deductible.
4.11 Breast Reconstruction Surgery
Amounts you pay for breast reconstruction surgery, as well as breast prosthesis, following a mastectomy for cancer can be included.
4.12 Capital Expenses
You can include amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. The cost is reduced by any increase in the value of your property.
Examples of Home Improvements
- Constructing entrance or exit ramps
- Widening doorways
- Installing railings, support bars, or other modifications to bathrooms
- Lowering or modifying kitchen cabinets and equipment
- Moving or modifying electrical outlets and fixtures
- Installing porch lifts and other forms of lifts
- Modifying fire alarms, smoke detectors, and other warning systems
- Modifying stairways
- Adding handrails or grab bars anywhere
- Modifying hardware on doors
- Modifying areas in front of entrance and exit doorways
- Grading the ground to provide access to the residence
4.13 Car Modifications
The cost of special hand controls and other equipment installed in a car for use by a person with a disability can be included. Also, the difference between the cost of a regular car and a car specially designed to hold a wheelchair is deductible.
4.14 Chiropractor
Fees you pay to a chiropractor for medical care are deductible.
4.15 Christian Science Practitioner
Fees you pay to Christian Science practitioners for medical care are includible.
4.16 Condoms
The amount you pay to purchase condoms is deductible.
4.17 Contact Lenses
Amounts you pay for contact lenses needed for medical reasons, including the cost of equipment and materials required for using them, such as saline solution and enzyme cleaner, are deductible.
4.18 Crutches
The amount you pay to buy or rent crutches is includible.
4.19 Dental Treatment
Amounts you pay for the prevention and alleviation of dental disease, including teeth cleaning, sealants, fluoride treatments, X-rays, fillings, braces, extractions, and dentures, are deductible.
4.20 Diagnostic Devices
The cost of devices used in diagnosing and treating illness and disease can be included.
4.21 Disabled Dependent Care Expenses
Some disabled dependent care expenses may qualify as either medical expenses or work-related expenses for purposes of taking a credit for dependent care. You can choose to apply them either way as long as you don’t use the same expenses to claim both a credit and a medical expense deduction.
4.22 Drug Addiction
Amounts you pay for inpatient treatment at a therapeutic center for drug addiction, including meals and lodging, are deductible. Also deductible are transportation costs to and from drug treatment meetings if attendance is pursuant to competent medical advice.
4.23 Eye Exam and Eyeglasses
You can include the amount you pay for eye examinations and eyeglasses needed for medical reasons.
4.24 Eye Surgery
Amounts you pay for eye surgery to treat defective vision, such as laser eye surgery or radial keratotomy, are includible.
4.25 Fertility Enhancement
The cost of procedures performed on yourself, your spouse, or your dependent to overcome an inability to have children, such as in vitro fertilization and surgery, is deductible.
4.26 Guide Dog or Other Service Animal
The costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing-disabled person, or a person with other physical disabilities, are includible.
4.27 Health Institute
Fees you pay for treatment at a health institute are deductible only if the treatment is prescribed by a physician and the physician issues a statement that the treatment is necessary to alleviate a physical or mental disability or illness.
4.28 Health Maintenance Organization (HMO)
Amounts you pay to entitle you, your spouse, or a dependent to receive medical care from an HMO are treated as medical insurance premiums and are deductible.
4.29 Hearing Aids
The cost of a hearing aid and batteries, repairs, and maintenance needed to operate it is includible.
4.30 Hospital Services
Amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care, including meals and lodging, are deductible.
4.31 Insurance Premiums
You can include insurance premiums you pay for policies that cover medical care, including hospitalization, surgical services, X-rays, prescription drugs and insulin, dental care, replacement of lost or damaged contact lenses, and long-term care.
4.32 Intellectually and Developmentally Disabled, Special Home for
You can include the cost of keeping a person who is intellectually and developmentally disabled in a special home, not the home of a relative, on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital to community living.
4.33 Laboratory Fees
Amounts you pay for laboratory fees that are part of medical care are deductible.
4.34 Lead-Based Paint Removal
The cost of removing lead-based paints from surfaces in your home to prevent a child who has or had lead poisoning from eating the paint is deductible.
4.35 Learning Disability
Fees you pay on a doctor’s recommendation for a child’s tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities are includible. Also, the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities is deductible.
4.36 Legal Fees
Legal fees you paid that are necessary to authorize treatment for mental illness can be included.
4.37 Lifetime Care—Advance Payments
A part of a life-care fee or “founder’s fee” you pay either monthly or as a lump sum under an agreement with a retirement home that is properly allocable to medical care can be included.
4.38 Lodging
You can include the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. You may also be able to include the cost of lodging not provided in a hospital or similar institution, up to $50 for each night for each person.
4.39 Long-Term Care
Amounts paid for qualified long-term care services and certain amounts of premiums paid for qualified long-term care insurance contracts are deductible.
4.40 Meals
You can include the cost of meals at a hospital or similar institution if a principal reason for being there is to get medical care.
4.41 Medical Conferences
Amounts paid for admission and transportation to a medical conference if the medical conference concerns the chronic illness of yourself, your spouse, or your dependent can be included.
4.42 Medicines
Amounts you pay for prescribed medicines and drugs can be included. A prescribed drug is one that requires a prescription by a doctor for its use by an individual. You can also include amounts you pay for insulin.
4.43 Nursing Home
The cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents is includible. This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care.
4.44 Nursing Services
Wages and other amounts you pay for nursing services can be included.
4.45 Operations
Amounts you pay for legal operations that aren’t for cosmetic surgery can be included.
4.46 Optometrist
See Eyeglasses, earlier.
4.47 Organ Donors
See Transplants, later.
4.48 Osteopath
You can include in medical expenses amounts you pay to an osteopath for medical care.
4.49 Oxygen
You can include in medical expenses amounts you pay for oxygen and oxygen equipment to relieve breathing problems caused by a medical condition.
4.50 Physical Examination
You can include in medical expenses the amount you pay for an annual physical examination and diagnostic tests by a physician. You don’t have to be ill at the time of the examination.
4.51 Pregnancy Test Kit
You can include in medical expenses the amount you pay to purchase a pregnancy test kit to determine if you are pregnant.
4.52 Prosthesis
See Artificial Limb and Breast Reconstruction Surgery, earlier.
4.53 Psychiatric Care
You can include in medical expenses amounts you pay for psychiatric care. This includes the cost of supporting a mentally ill dependent at a specially equipped medical center where the dependent receives medical care. See Psychoanalysis next and Transportation, later.
4.54 Psychoanalysis
You can include in medical expenses payments for psychoanalysis. However, you can’t include payments for psychoanalysis that is part of required training to be a psychoanalyst.
4.55 Psychologist
You can include in medical expenses amounts you pay to a psychologist for medical care.
4.56 Special Education
You can include in medical expenses fees you pay on a doctor’s recommendation for a child’s tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders.
You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. Overcoming the learning disabilities must be the primary reason for attending the school, and any ordinary education received must be incidental to the special education provided. Special education includes:
- Teaching Braille to a visually impaired person,
- Teaching lip reading to a hearing disabled person, or
- Giving remedial language training to correct a condition caused by a birth defect.
4.57 Sterilization
You can include in medical expenses the cost of a legal sterilization (a legally performed operation to make a person unable to have children). Also see Vasectomy, later.
4.58 Stop-Smoking Programs
You can include in medical expenses amounts you pay for a program to stop smoking. However, you can’t include in medical expenses amounts you pay for drugs that don’t require a prescription, such as nicotine gum or patches, that are designed to help stop smoking.
4.59 Surgery
See Operations, earlier.
4.60 Telephone
You can include in medical expenses the cost of special telephone equipment that lets a person who is deaf, hard of hearing, or has a speech disability communicate over a regular telephone. This includes teletypewriter (TTY) and telecommunications device for the deaf (TDD) equipment. You can also include the cost of repairing the equipment.
4.61 Television
You can include in medical expenses the cost of equipment that displays the audio part of television programs as subtitles for persons with a hearing disability. This may be the cost of an adapter that attaches to a regular set. It may also be the part of the cost of a specially equipped television that exceeds the cost of the same model regular television set.
4.62 Therapy
You can include in medical expenses amounts you pay for therapy received as medical treatment.
4.63 Transplants
You can include in medical expenses amounts paid for medical care you receive because you are a donor or a possible donor of a kidney or other organ. This includes the cost of medical care for the donor, in connection with the donation of an organ to you, your spouse, or dependent. This also includes transportation expenses.
4.64 Transportation
You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care.
You can include:
- Bus, taxi, train, or plane fares or ambulance service;
- Transportation expenses of a parent who must go with a child who needs medical care;
- Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone; and
- Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment.
Car expenses.
You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. You can’t include depreciation, insurance, general repair, or maintenance expenses.
If you don’t want to use your actual expenses for 2024, you can use the standard medical mileage rate of 21 cents a mile.
You can also include parking fees and tolls. You can add these fees and tolls to your medical expenses whether you use actual expenses or the standard mileage rate.
4.65 Trips
You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. You may be able to include up to $50 for each night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Meals aren’t included. See Lodging, earlier.
4.66 Tuition
Under special circumstances, you can include charges for tuition in medical expenses. See Special Education, earlier.
A lump-sum fee which includes education, board, and medical care—without distinguishing which part of the fee results from medical care—is not considered an amount payable for medical care. However, you can include charges for a health plan included in a lump-sum tuition fee if the charges are separately stated or can easily be obtained from the school.
4.67 Vasectomy
You can include in medical expenses the amount you pay for a vasectomy.
4.68 Vision Correction Surgery
See Eye Surgery, earlier.
4.69 Weight-Loss Program
You can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). This includes fees you pay for membership in a weight reduction group as well as fees for attendance at periodic meetings. You can’t include membership dues in a gym, health club, or spa as medical expenses, but you can include separate fees charged there for weight loss activities.
4.70 Wheelchair
You can include in medical expenses the amounts you pay for a wheelchair used for the relief of a sickness or disability. The cost of operating and maintaining the wheelchair is also a medical expense.
4.71 Wig
You can include in medical expenses the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of their hair from disease.
4.72 X-ray
You can include in medical expenses amounts you pay for X-rays for medical reasons.
5. What Expenses Aren’t Includible?
What medical expenses are not includible? Knowing what you can’t deduct is as important as knowing what you can. Here’s a list of expenses that you generally can’t include:
5.1 Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby
You can’t include in medical expenses amounts you pay for the care of children, even if the expenses enable you, your spouse, or your dependent to get medical or dental treatment. Also, any expense allowed as a childcare credit can’t be treated as an expense paid for medical care.
5.2 Controlled Substances
You can’t include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc.) that aren’t legal under federal law, even if such substances are legalized by state law.
5.3 Cosmetic Surgery
Generally, you can’t include in medical expenses the amount you pay for cosmetic surgery. This includes any procedure that is directed at improving the patient’s appearance and doesn’t meaningfully promote the proper function of the body or prevent or treat illness or disease. You generally can’t include in medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction.
5.4 Dancing Lessons
You can’t include in medical expenses the cost of dancing lessons, swimming lessons, etc., even if they are recommended by a doctor, if they are only for the improvement of general health.
5.5 Diaper Service
You can’t include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease.
5.6 Flexible Spending Arrangement
You can’t include in medical expenses amounts for which you are fully reimbursed by your flexible spending arrangement if you contribute a part of your income on a pre-tax basis to pay for the qualified benefit.
5.7 Funeral Expenses
You can’t include in medical expenses amounts you pay for funerals.
5.8 Future Medical Care
Generally, you can’t include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year.
5.9 Hair Transplant
See Cosmetic Surgery*, earlier.
5.10 Health Club Dues
You can’t include in medical expenses health club dues or amounts paid to improve one’s general health or to relieve physical or mental discomfort not related to a particular medical condition.
5.11 Health Savings Accounts
You can’t include in medical expenses amounts you contribute to a health savings account. You can’t include expenses you pay for with a tax-free distribution from your health savings account. You also can’t use other funds equal to the amount of the distribution and include the expenses. For more information, see Pub. 969.
5.12 Household Help
You can’t include in medical expenses the cost of household help, even if such help is recommended by a doctor. This is a personal expense that isn’t deductible. However, you may be able to include certain expenses paid to a person providing nursing-type services.
5.13 Illegal Operations and Treatments
You can’t include in medical expenses amounts you pay for illegal operations, treatments, or controlled substances whether rendered or prescribed by licensed or unlicensed practitioners.
5.14 Insurance Premiums
See Insurance Premiums under What Medical Expenses Are Includible, earlier.
5.15 Maternity Clothes
You can’t include in medical expenses amounts you pay for maternity clothes.
5.16 Medical Savings Account (MSA)
You can’t include in medical expenses amounts you contribute to an Archer MSA. You can’t include expenses you pay for with a tax-free distribution from your Archer MSA. You also can’t use other funds equal to the amount of the distribution and include the expenses. For more information on Archer MSAs, see Pub. 969.
5.17 Medicines and Drugs From Other Countries
In general, you can’t include in your medical expenses the cost of a prescribed drug brought in (or ordered and shipped) from another country. You can only include the cost of a drug that was imported legally. For example, you can include the cost of a prescribed drug the Food and Drug Administration announces can be legally imported by individuals.
You can include the cost of a prescribed drug you purchase and consume in another country if the drug is legal in both the other country and the United States.
5.18 Nonprescription Drugs and Medicines
Except for insulin, you can’t include in medical expenses amounts you pay for a drug that isn’t prescribed. A prescribed drug is one that requires a prescription by a doctor for its use by an individual.
5.19 Nutritional Supplements
You can’t include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc., unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. These items are taken to maintain your ordinary good health and aren’t for medical care.
5.20 Personal Use Items
You can’t include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental disability or illness. For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense.
5.21 Surrogacy Expenses
You can’t include in medical expenses the amounts you pay for the identification, retention, compensation, and medical care of a gestational surrogate because they are paid for an unrelated party who is not you, your spouse, or your dependent.
5.22 Swimming Lessons
See Dancing Lessons*, earlier.
5.23 Teeth Whitening
You can’t include in medical expenses amounts paid to whiten teeth.
5.24 Veterinary Fees
You generally can’t include veterinary fees in your medical expenses, but see *Guide Dog or Other Service Animal under What Medical Expenses Are Includible*, earlier.
5.25 Weight-Loss Program
You can’t include in medical expenses the cost of a weight-loss program if the purpose of the weight loss is the improvement of appearance, general health, or sense of well-being. You can’t include amounts you pay to lose weight unless the weight loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). If the weight-loss treatment isn’t for a specific disease diagnosed by a physician, you can’t include either the fees you pay for membership in a weight-reduction group or fees for attendance at periodic meetings. Also, you can’t include membership dues in a gym, health club, or spa.
6. How to Treat Reimbursements
How do reimbursements affect your medical expense deduction? You can only include amounts paid during the tax year for which you received no insurance or other reimbursement.
6.1 Insurance Reimbursement
You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. This includes payments from Medicare.
6.2 What if Your Insurance Reimbursement Is More Than Your Medical Expenses?
If you are reimbursed more than your medical expenses, you may have to include the excess in income. The rules vary depending on who paid the premiums.
- Premiums paid by you: Generally, you don’t include the excess reimbursement in your gross income.
- Premiums paid by you and your employer: You must include in your gross income the part of your excess reimbursement that is from your employer’s contribution.
- Premiums paid by your employer: You must report all of your excess reimbursement as other income.
6.3 What if You Receive Insurance Reimbursement in a Later Year?
If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you must generally report the reimbursement as income up to the amount you previously deducted as medical expenses.
6.4 What if You Are Reimbursed for Medical Expenses You Didn’t Deduct?
If you didn’t deduct a medical expense in the year you paid it because your medical expenses weren’t more than 7.5% of your AGI or because you didn’t itemize deductions, don’t include the reimbursement, up to the amount of the expense, in income.
7. Long-Term Care and Qualified Long-Term Care Insurance Contracts
What are the specific rules for long-term care expenses? Long-term care expenses and qualified long-term care insurance contracts have specific rules.
7.1 Qualified Long-Term Care Services
Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services that are:
- Required by a chronically ill individual, and
- Provided pursuant to a plan of care prescribed by a licensed health care practitioner.
Chronically Ill Individual
An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions.
- The individual is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence.
- The individual requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.
7.2 Qualified Long-Term Care Insurance Contracts
A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. The contract must:
- Be guaranteed renewable;
- Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed;
- Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits; and
- Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses.
The amount of qualified long-term care premiums you can include is limited.
8. How to Figure and Report the Deduction on Your Tax Return
How do you actually claim the medical expense deduction?
8.1 What Tax Form Do You Use?
You report your medical expense deduction on Schedule A (Form 1040). You should keep records of your medical and dental expenses to support your deduction but don’t send these records with your paper return.
8.2 Sale of Medical Equipment or Property
If you deduct the cost of medical equipment or property in one year and sell it in a later year, you may have a taxable gain. The taxable gain is the amount of the selling price that is more than the adjusted basis of the equipment or property.
8.3 Damages for Personal Injuries
If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year.
9. Impairment-Related Work Expenses
If you are a person with disabilities, you can take a business deduction for expenses that are necessary for you to be able to work. These impairment-related work expenses aren’t subject to the 7.5% limit that applies to medical expenses.
9.1 Impairment-Related Expenses Defined
Im
