What to Know About Deducting Medical Expenses on Your Taxes
Most Americans want to pay as little as possible on taxes while staying above the law. That’s why deductions are so important. What portion of your medical expenses can you deduct?
U.S. tax law is confusing for a few reasons. First, it’s always changing — every tax year brings a new rule. Second, different expense categories have different rules about what (and how much) you can deduct. One of those categories is medical expenses.
Here’s a rundown of when you can deduct medical expenses on your taxes, plus the portion of medical expenses that are eligible for deduction.
When are medical expenses tax-deductible?
People who choose to itemize their expenses on Form 1040 (Schedule A) may be able to deduct medical and dental expenses for themselves, their spouse, and their dependents.
Some people choose to itemize their expenses rather than supplying a lump sum standard deduction. Individuals will have to determine which is more advantageous to them depending on their unique circumstances.
For those who do itemize their expenses and want to deduct medical expenses, know this: You can only deduct medical expenses when the total cost exceeds 7.5 percent of your adjusted gross income for the year.
For example, say you earned an adjusted gross income of $90,000 in 2021. You can only deduct eligible medical expenses if the costs exceeded $6,750 over the course of the year.
What types of medical expenses can you deduct if you're eligible?
If you’re eligible to deduct medical expenses on your taxes, use this list as a starting guide for which expenses you can deduct:
Doctor fees (including doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and non-traditional medical practitioners)
Inpatient hospital or nursing home costs
Acupuncture and addiction treatment costs (including alcohol, drugs, and smoking cessation)
Eligible weight-loss treatment (including obesity treatment)
Prescription costs (including insulin)
Ticket and transportation costs for medical conferences for a chronic illness you or someone in your family has
Payments for “false teeth, reading or prescription eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and for a guide dog or other service animal,” according to the IRS
Transportation costs for eligible medical care
Some premium costs depending on your employment status and specific health insurance plan
Personal protective equipment (PPE), as of the COVID-19 pandemic beginning in 2020
Most people don’t itemize their expenses for their taxes, simply because the standard deduction tends to provide a greater tax benefit. However, people with high medical expenses may benefit from itemizing so they can deduct a plethora of medical-related expenses.
Self-employed individuals can deduct health insurance premiums.
If you’re self-employed, you may be able to deduct your self-employed health insurance premium. Rather than an itemized deduction, this works as an income adjustment that reduces your gross earnings.
Self-employed people can also deduct health insurance premium costs for their spouse, dependents, and any children who are under the age of 27 at the end of 2021.
For example, if you paid $500 per month for an individual health insurance premium, you can reduce your annual gross income for tax purposes by $6,000. If you paid a premium of $1,200 per month for health insurance for your family of three, you can reduce your taxable income by $14,400.