Tax Topics

Jackson Hewitt® is here to help you understand complex tax laws so you can be better informed and take full advantage of tax law provisions.

These topics explore some of the more important aspects of complicated tax laws, in a manner that is understandable and concise.


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Medical Expenses

Medical Expenses - Itemized Deductions

If you itemize your deductions, you may be able to deduct medical expenses. You can deduct the amount that is greater than 10% (7.5% if you are age 65 or older) of your adjusted gross income. Generally, you are allowed to deduct unreimbursed medical, eye care, and dental expenses. You cannot include the cost of unnecessary cosmetic surgery that is solely for the purpose of improving appearance. Advance payments are not deductible until the service is rendered.

You can generally include medical expenses you pay for yourself as well as those you pay for someone who was your spouse or dependent. A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met:

  • The person was a qualifying child or qualifying relative.
  • The person was a U.S. citizen or national, or a resident of the United States, Canada, or Mexico.

You can include medical expenses that you paid for any person who meets these requirements even if you cannot claim an exemption for that person on your tax return. To include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Under most circumstances, each parent can include the medical expenses they pay for the child, unless the child's exemption is being claimed under a multiple support agreement. You can also claim the medical expenses you paid for a parent who would be a dependent except their taxable income is greater than $3,900 and/or they filed a joint tax return.

Medical Expenses - What Is Deductible?

Deductible medical expenses include expenses for legal abortion, acupuncture, inpatient treatment for alcoholism, transportation to and from Alcoholics Anonymous Club meetings, ambulance service, an artificial limb, artificial teeth, chiropractor fees, Christian Science Practitioner fees, contact lenses, crutches, dental expenses, inpatient treatment at a drug rehabilitation center, eyeglasses, eye surgery including surgery to correct vision, some fertility enhancement, purchase and care of a guide dog, hearing aids, hospital expenses, health insurance premiums not paid with pre-tax dollars, laboratory fees, lead-based paint removal, legal fees needed to authorize treatment for mental illness, the portion of life-care or advance payment that you pay to a retirement home that is for medical care, lodging up to $50 per day per person that is necessary to receive medical care, admission and transportation to a medical conference for a chronic illness of you, your spouse, or your dependent, fees paid to physicians, surgeons, specialists, dentists, psychologist, and other medical practitioners, prescription drugs and insulin, nursing home, nursing services, oxygen, special education recommended by a doctor for learning disabilities caused by mental or physical impairment, sterilization, telephone and television equipment and repair for a hearing impaired person, transportation expenses including bus, taxi, plane, or 23.5 cents per mile for miles you drive for medical purposes plus parking fees and tolls, weight-loss program for a specific diseases diagnosed by a physician (such as obesity, hypertension or heart disease), and wheelchair purchase and repair. The cost of sex change surgery and breast pumps are also qualified medical expenses.

 

You can include in medical expenses amounts you pay for special equipment installed in a home or for improvements that have a medical purpose (such as ramps for your home, widening doorways, and installing support bars). Only the amount of the expense that exceeds the increase in the property value of your home is deductible. Amounts paid to buy and install special plumbing fixtures for medical reasons in a home you rent are deductible if the landlord does not reimburse you or lower the rent.

 

You cannot deduct expenses for cosmetic surgery, dancing lessons, diaper service, funeral expenses, health club dues, maternity clothes, nonprescription drugs, nutritional supplements, teeth whitening, or veterinary fees.

 

You cannot deduct expenses reimbursed to you.

Medical Expenses - Maximize Your Deductions

If you file Form 1040, U.S. Individual Income Tax Return, and itemize your deductions, you may deduct medical expenses that are greater than 10% (7.5% if y ou are age 65 or older) of your adjusted gross income. Careful tax planning may allow you to take more medical deductions during one tax year instead of spreading them over two. For example, in a year that you already have substantial medical expenses, schedule and pay for your routine doctor or dentist appointments by December 31 instead of early in the next year. Payments made on a credit card or by check are considered paid at the time the payment is made.

Self-Employed Health Insurance

If you are self-employed, you may deduct up to 100% of your medical insurance costs of a plan established under your business that covers yourself, your spouse, and your dependents. Take the deduction on Form 1040 as an adjustment to income. You may not take this deduction for any month in which you or your spouse were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer.

Medical Expenses for Long-Term Care

The costs of qualified long-term care services can generally be included as medical expenses. Deductible medical expenses also include a portion (based on age of the insured) of the premiums paid for qualified long-term care insurance.

Health Coverage Tax Credit

There is a health coverage tax credit available to certain individuals who receive a pension benefit from the Pension Benefit Guaranty Corporation (PBGC) or who are eligible to receive certain Trade Adjustment Assistance (TAA), are eligible for the Alternate Trade Adjustment Assistance (ATAA) program, or are eligible Reemployment Trade Adjustment Assistance (RTAA) recipients. If you qualify, you can claim a credit equal to 72.5% of the premiums you paid for qualified health insurance in 2013. The credit is available monthly as premiums come due, annually when you file your taxes, or a combination of both. Complete Form 8885, Health Coverage Tax Credit.