January 19, 2024
The taxpayer may be able to reduce their taxes by paying out-of-pocket medical expenses and health insurance premiums.
Keeping good records and knowing what to deduct make all the difference.
Taxpayers can only claim medical expenses that they paid for if they itemize deductions on a federal tax return. Taxpayers can deduct most medical and dental costs that they paid for themselves, their spouses, and their dependents.
The Consolidated Appropriations Act, 2021 included changes to tax benefits for medical expenses. The Act provides for a permanent reduction in the medical expense deduction threshold from 10% to 7.5% of adjusted gross income. For example, a taxpayer with an adjusted gross income of $100,000, the itemized deduction will apply if their out-of-pocket expenses exceed $7,500.
Qualifying Expenses:
In order to be eligible for the medical expense deduction, an individual’s expenses must be paid for medical care. Expenses for medical care include payments for medical or dental services, prescription medicine and drugs, insulin, contact lens, glasses, hearing-aid, medical equipment and supplies, medical insurance premiums, transportation needed to get medical care, and other medical-related expenses.
Although capital expenditures for home improvements and related items are generally not deductible, however if the purpose of a capital expenditure is for the medical care for the taxpayers, their spouse or dependents, the cost can be deductible. For example, costs such as installing slope for wheelchair, widening door opening, and renovating handicapped bathrooms are eligible for deduction.
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