By John Waggoner, AARP February 2023
You might be able to write off costs if you itemize and have a lot of them.
Lots of things qualify for the medical deduction, and that's a positive for taxpayers. Uncle Sam, however, has put some big barriers in the way for people who want to qualify to write off their health care costs. But if your medical bills are substantial, you still might be able to get a tax break from the IRS despite those barriers.
Let's start with the good news. Tax law takes a fairly expansive view about what qualifies as medical expenses, assuming those expenses haven't been reimbursed by insurance. “Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body,” according to the IRS. In practical terms, that includes non-reimbursed payments to doctors, dentists, surgeons and other medical professionals, including nontraditional medical practitioners, such as acupuncturists. You may also deduct:
Hospital care and nursing care, if the availability of medical care is the principal reason for being in the nursing home, including the cost of meals and lodging charged by the hospital or nursing home.
Prescription drugs, such as insulin.
Payments for addiction or smoking cessation programs.
Payments for weight-loss programs for specific diseases diagnosed by a physician.
False teeth, reading or prescription glasses, contact lenses, hearing aids, crutches, wheelchairs, guide dogs or other service animals.
For a full rundown of deductible expenses, see IRS Publication 502 (2022), “Medical and Dental Expenses.” You claim your itemized medical and dental deductions on Schedule A.
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Understand the 7.5 percent limit
Although many medical and dental expenses are deductible, there's a high bar to clear in order to qualify. You may deduct only the amount of your total unreimbursed medical expenses that exceed 7.5 percent of your adjusted gross income (the amount on Form 1040 or Form 1040-SR, line 8b).
Let's say your adjusted gross income is $40,000. In order to deduct your medical expenses, they must add up to more than $3,000 — 7.5 percent of $40,000. Furthermore, you can deduct only the amount that's above 7.5 percent of your adjusted gross income.
In this example, if you had AGI of $40,000 and $3,500 in unreimbursed medical deductions, you could deduct $500 worth of those expenses. Just keep in mind that in order to take any deduction at all, your total itemized deductions have to be worth more than the standard deduction. For the 2022 tax year, that's $12,950 for single filers, $25,900 for those married filing jointly and $19,400 for heads of household. The standard deduction is even higher if you're 65 or older.
Let's say, for example, you had AGI of $40,000, $4,000 in medical deductions, $4,000 in mortgage interest and $4,000 in charitable deductions. You could take only $1,000 in medical deductions, because of the 7.5 percent limitation. Your total deductions would be $9,000. No matter whether you filed a single return or a joint one, you'd be better off taking the higher standard deduction.
Nevertheless, medical expenses can be considerable as you get older, and the medical tax deduction can come in handy for when you have large, unreimbursed medical expenses. For example, suppose you were married and your spouse used a wheelchair. You could deduct the cost of the wheelchair. As well, you can deduct improvements to the home, such as a ramp, that was needed to accommodate the wheelchair. If the capital improvements increase the value of the home, you have to subtract that amount from your deduction. Ramps, however, generally don't increase the value of your home, according to the IRS, nor do widening your doorways, adding grab bars or modifying hardware on doors.
Suppose you had $40,000 in AGI as well as these medical expenses in the 2022 tax year:
Wheelchair ramp: $20,000
Other unreimbursed medical expenses: $11,500
You have to reduce your medical expenses by 7.5 percent of your AGI: 7.5 percent of $40,000 is $3,000. Your remaining medical expenses are $28,500 ($31,500 minus $3,000). In this case, you'd get a bigger tax break by itemizing your deductions than by taking the standard deduction, even if you're 65 or older.