A Lot of Therapy Expenses are Tax Deductible

There are many ways to lower your tax bill, and some include claiming certain expenses. Medical expenses can take a big bite out of your budget. Is therapy tax deductible?

A deduction is an item that reduces your taxable income, lowering your overall tax bill. These are different from tax credits, which are directly subtracted from the taxes you owe. There are many deductions you can claim, such as education and travel expenses and support for dependents.

The IRS states that to deduct your medical expenses, you must itemize your deductions on Form 1040 Schedule A. It only makes sense to itemize your deductions if they amount to more than the standard deduction.

The IRS lets you deduct several medical expenses, including unreimbursed payments for preventative care, treatment, surgery, dental and vision care, visits to psychologists and psychiatrists, prescription medications, appliances such as glasses, contacts, false teeth, and hearing aids, and travel for qualified medical care. However, you are allowed to deduct only the qualified unreimbursed medical care expenses that exceed 7.5 percent of your adjusted gross income (AGI).

The best test to determine whether a medical expense is deductible is to ask yourself if you needed it—only procedures that are medically necessary can be written off. More information on what medical expenses can and can’t be deducted from your taxes is available in IRS Publication 502.

Whereas the line between deductible and non-deductible medical expenses is vague, according to the IRS, you can deduct your therapy expenses if the treatment aims to address a physical ailment that's interfering with your life. Treatment administered by a psychologist, psychiatrist, psychoanalyst, or occupational therapist is covered, as is treatment for alcoholism or drug addiction.

Mental health counseling, art therapy, pain management, massage therapy, acupuncture, developmental therapy, and physical therapy are covered as well.

Mileage, tolls, and parking expenses accrued while traveling for treatment may be deducted, in addition to insurance premiums you paid and expenses for special equipment that may help in your recovery. Prescription medications, long-term care expenses, and home healthcare are also deductible. Additionally, you can deduct expenses for your spouse and dependents, assuming you paid for them.

Like for any other medical expense, to claim therapy as a tax deduction, you need to file Form 1040 Schedule A and itemize your deductions. You’ll need to enter your total medical expenses on line 1 and AGI on line 2, then calculate 7.5 percent of your AGI and state the difference between that and your medical expenses on line 4.