Some out-of-pocket healthcare expenses can be deducted on your tax return when you file this year. This includes medical and dental expenses for yourself, your spouse, and your dependents for the previous year, plus mileage driven to and from appointments.
For those who’ve had recurring doctors appointments, therapy, surgery, or have ongoing medical expenses for themselves or their family members, these expenses can really add up. Deducting them on your taxes can lower your taxable income, and therefore decrease the amount of tax that you may owe.
Which healthcare expenses can be deducted from taxes?
According to the IRS website, deductible “medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.” See the IRS list of deductible medical expenses. You may also be able to deduct your mileage driven to/from medical appointments if you itemize your deductions.
Not all medical expenses will decrease your taxable income. The IRS says, “You may deduct only the amount of your total medical expenses that exceeded 7.5% of your adjusted gross income during the year.” (This amount increases to 10% of adjusted gross income for tax year 2020).
Additional tax deductions may include HSA account contributions, as well as out of pocket health insurance payments, for employed or self-employed individuals. According to Insurance.com, “If you have health insurance through your employer and your share of the premium is deducted from your paycheck pre-tax, you cannot deduct the cost because the premiums were tax-free already.” After-tax health insurance payments can be itemized.
Should you itemize all of your medical expenses, or take the standard deduction?
In order to lower your taxable income, should you itemize all of your medical expenses, or just take the standard deduction? Tax preparer H&R Block advises, “The standard deduction lowers your income by one fixed amount. On the other hand, itemized deductions are made up of a list of eligible expenses. You can claim whichever lowers your tax bill the most.”
If you’ve had a major medical event this year (such as surgery), and/or have regularly recurring medical expenses, itemizing these expenses may make a difference in lowering your taxable income. To make the process of expense itemization go smoothly, run a report from your personal budgeting program or collect your receipts to have on hand when preparing your taxes. If your total medical expenses in 2020 exceeded 10% of your adjusted gross income, they may ultimately decrease the amount of tax you will owe the IRS.
This article is provided for educational purposes only, and is not intended as financial or tax advice. For questions and guidance on your specific situation, contact the IRS, or consult with your accountant or personal tax advisor.