Deductions are a way to lower your tax liability. Maximizing your deductions across all areas gives you access to tax savings. One area where some taxpayers could be missing out on deductions is in medical expenses. Here are ways to you could potentially get the most out of tax deductions where healthcare expenses are concerned.
What is a medical expense?
The IRS clearly describes what’s considered a qualified expense. Any expense incurred for the purpose of diagnosing, curing, treating, mitigating or preventing an ailment is considered a qualified expense. That leaves ample opportunity for taxpayers to claim deductions and credits to reduce your overall tax liability.
Deducting the max amount
The IRS has established a maximum threshold amount for which you can deduct in qualified healthcare expenses. The Tax Reform and Jobs Act of 2017, enacted on December 22, 2017, changed the AGI threshold for medical expenses from 10% to 7.5% for 2017 (and 2018).
Examples of qualified expenses:
• Ambulatory transport
• Laboratory tests required for treatment
• Health insurance premiums
• Fees to physicians, surgeons, dentists, psychiatrists, and chiropractors
• Health equipment
• Acupuncture treatment
• Inpatient hospital care
• Smoking cessation and inpatient drug treatment programs
• Cosmetic surgery required as a result of an accident
Where do you claim these health-related expenses?
Deductions should be itemized using the Schedule A form. This information is entered on the first line of the form. The total amount of healthcare expenses should be added to that particular line. The difference between your medical expenses and adjusted gross income is used to reduce your taxable income for that year.
Qualified expenses that can be deducted without itemization
You are permitted to deduct some expenses without having to fill out a Schedule A form. Your contributions made to your health savings account can be deducted like similar retirement funds. Individuals can deduct up to $3,400 for individuals and $6,750 for a family annually. Flexible spending account contributions can be deducted as well. You can deduct $2,600 annually as an individual. For couples, you are only able to deduct $2,600 for purpose. If you pay any insurance premiums as a self-employed individual, you can claim that as a deduction. If you have paid premiums for long term care insurance, you can deduct the total amount of payments made toward insurance premiums for the calendar year. Those who had to by healthcare equipment for a recognized disability can deduct these as expenses. Any reimbursements you receive for a physical injury or other expenses as a result of a legal claim can be deducted. You can claim the health coverage tax credit if you paid monthly health insurance premiums. The credit covers 72.5 percent of your monthly health insurance premiums.
Remember, the last day to file taxes in 2018 is Tuesday, April 17.