What's the Deal with Medical Expenses?
Mar 30, 2012
Medical expenses are funny in that you REALLY have to have been sick in order to MAYBE get a deduction. Why maybe? Because you have to jump a couple of hurdles to see any benefits, per the following:
First, the deductible amount of medical expenses is only that which exceeds 7.5% of your adjusted gross income (AGI). So for example, a family that makes around $70,000 per year has to have more than $5250 (70000 x 7.5%) of medical expenses in order to claim anything. So, if the total spent on medical expenses is $6250, they get to deduct $1000 and if the total spent is $10250, they claim a $5000 medical deduction...and so on.
Second, in keeping with the example above, let's say this family had the $10250 of medical expenses. "Yay, we get to subtract $5000 from our taxable income...right?" Wrong. Now they have to deal with the fact that medical expenses get reported on schedule A, Itemized Deductions.
The IRS automatically gives a married filing joint couple $11600 for a "standard deduction" ($5800-S & MFS and $8500-HOH), so if all this family had were those medical expenses, plus $4000 of mortgage interest, $1000 of property taxes, and $1000 of donations, then they don't get any benefit from the medical expense deduction (because it all added up to $11000, which is less than the $11600 standard deduction).
For illustration's sake, now let's say that the family had $8600 of mortgage interest instead of only $4000. Now their total itemized deductions equal $15600, which is really looking good, right? Maybe, maybe not.
The final hurdle is whether the medical expense is considered so by IRS standards (not yours). In this poor family's case, they spent $3000 on teeth whitening for mom and dad who had quit smoking earlier that year. They also spent another $2000 on a family membership at the gym that really has them at their healthiest levels ever! However, as much as they benefited from these two expenditures, they are not qualified medical expenditures. So there is no medical deduction, and therefore, no schedule A to file.
What could this family have done differently, if anything? About the only thing they can do is to "plan" their medical expenses by "pooling" the expenses into one year, whenever time and life expectancy permits. So for example, if you need to have your wisdom tooth pulled because it got infected during Christmas dinner, be brave and schedule an appointment for the following year. If you have to schedule a surgery--and you will live if you postpone it until the following year--postpone it. If you've already had a few expenses in the year and you're on the fence about buying new glasses for yourself and contacts for the kids--buy them this year...don't wait til next year when that may be the only expense you (hopefully) have. You get the picture.
To see a comprehensive list of medical expenses on the IRS website, check out the the following link, you may be surprised as to what qualifies and what doesn't:
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