As the Tax Cuts and Jobs Act of 2017 just about doubles the standard deduction amounts to $12,000 for individuals, $18,000 for heads of household, and $24,000 for joint filers and surviving spouses, the number of taxpayers who will itemize their tax deductions in 2018 may reduce significantly. Under the new tax law, taxpayers can deduct medical and dental expenses that exceed 7.5% of their adjusted gross income (AGI) for 2017 and 2018. Beginning in 2019, all taxpayers will only be able to deduct medical and dental expenses that exceed 10% of their AGI. Since 2018 is the last year to have a lower medical deduction threshold, it is time to understand whether or not the medical expenses you incurred this year qualify for a deduction on Schedule A. Read on – you may be surprised at some of the medical costs that are deductible!
According to the IRS, medical care expenses include payments for the diagnosis, cure, mitigation, treatment, prevention of disease, or payments for treatments affecting any structure or function of the body. Eligible medical expenses include, but are not limited to the following:
- Out-of-pocket payments to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners.
- Payments for physical or occupational therapists.
- Health insurance premiums, or premiums for qualified long-term care insurance policy that cover qualified long-term care services. However, you cannot deduct premiums paid with pretax dollars such as employer-sponsored policy unless the premiums are included in your wages.
- Payments to nursing homes and other long-term care facilities.
- Payments for smoking-cessation programs, inpatient alcohol or drug addiction programs, or weight-loss programs related to a specific disease diagnosed by a doctor. Nicotine patches or gum purchased over-the-counter cannot be deducted.
- Modifications to your home for medical purpose, such as installing wheelchair ramps, modifying doorways or hallways, and installing support bars or railings. It is important to note that some improvements increase the value of your home, so the IRS requires you to reduce the deductible amount by the increase in the value of your home.
- Transportation that is essential for medical care, such as taxi or bus fares, or out-of-pocket costs for using your personal car.
- Payments for durable medical equipment such as hearing aids, wheelchairs, and prescription eyeglasses or readers.
A few common non-qualified expenses include the following:
- Gym memberships
- Elective cosmetic surgery
- Over-the-counter medicines or supplements such as aspirin or multivitamins
- Toothpaste, mouthwash or other toiletries
If you incurred medical expenses and are not sure if they are eligible for deductions , or if you need advice on your overall tax planning, please contact your L&B professional at (858) 558-9200.