TAX: Is my deductible, er, uh, deductible?

by James

“Can I deduct my medical insurance deductible on my tax return?”

 

The answer to this question, like many tax questions, is “maybe.”

To be able to deduct normal everyday medical expenses (not those incurred in the course of your business), a couple of conditions have to be met:

1.       Your medical expenses must be more than 7.5% of your Adjusted Gross Income.

[This is the number at the bottom of page 1 of Form 1040 and is roughly just 7.5% of your total income.]

2.       Your total itemized deductions must exceed $11,400 for 2010 if you are married, filing jointly.

[The most common itemized deductions are medical expenses, mortgage interest, property taxes, sales tax, state income tax and charitable contributions.]

Once those two conditions are met, you will receive a tax benefit from those costly medical expenses.

Here are some things to remember about the medical expense deduction:

*Only unreimbursed medical expenses qualify.  This would include co-pays, annual deductible and other out of pocket expenses.

*The expenses must be paid during the year you are claiming them.

*You can include expenses for yourself, your spouse and your dependents.

*The expense must be for the diagnosis, cure, mitigation, treatment or prevention of disease or treatment of any structure or function of the body.

*Drugs are only deductible if they require a prescription (with the exception of insulin).

*Transportation costs essential to medical care are deductible.

*Medical insurance premiums are deductible if you pay them yourself.

*Dental & vision care also qualify.

Tax Planning Tip: With proper documentation in place, self-employed individuals may be able to deduct these expenses as business expenses, reducing self employment tax and avoiding the limits discussed above.