There are several types of medical expenses that Medicare doesn't cover, including long-term care, most dental care, dentures, exams for eyeglass prescriptions, hearing aids and exams for fitting them, acupuncture and cosmetic surgery.
If you've obtained or are considering any of the services on the Medicare non-eligible list, you may be wondering: Are those medical expenses tax-deductible?
Most of the medical expenses that Medicare doesn't cover do qualify for deduction on your federal income tax return. That way, you can potentially recover some of your out-of-pocket costs by lowering the amount of your taxable income, which may enable you to reduce your tax payment. However, there are certain IRS specifications to meet before you can take the deductions.
Here's what you need to know about the IRS rules for medical deductions, what types of medical costs you can and cannot deduct, and how to deduct qualified expenses on your tax return.
When Are Medical Expenses Tax-Deductible?
You can deduct the medical expenses you paid for in the year covered by your tax return as long as you received the care during the same year. In most cases, you're not allowed to deduct prepayments for future care.
You can include medical expenses among your itemized deductions. In order to itemize, the total amount of your deductions, including medical expenses, must be higher than your standard deduction. Generally, you can only deduct the costs of medical expenses that exceed 7.5% of your Adjusted Gross Income.
What Types Of Expenses Are Deductible?
The following Medicare-ineligible expenses are tax-deductible:
Contact lenses (if needed for medical, not cosmetic, reasons)
Dental care (for prevention and alleviation of dental disease)
Hearing aids, batteries and maintenance
What Types Of Expenses Are Not Deductible?
Like Medicare, the IRS also doesn't offer any financial breaks on the cost of cosmetic surgery, so you won't be able to deduct it on your tax return. And while dental care is a deductible medical expense, teeth whitening is not.
Once you understand the general rules of what makes medical expenses tax-deductible or not and have a list of eligible claims, you're ready to start filling out the appropriate tax forms to claim the deductions.
How Do I Deduct Medical Expenses On My Tax Return?
To deduct your medical expenses, you will first list them on IRS Schedule A. There are separate sections of the schedule for medical expenses and other categories of deductible expenses. Once you've added up all the expenses you want to deduct, you enter the total on IRS Form 1040.
In listing your expenses, you can include medical bills you paid for your own care as well as those you paid for someone who was your spouse or dependent either when you made the payment or when they received the medical service.
If you're married and you and your spouse file separate income tax returns, there are different rules depending on whether you live in a community property state.
In non-community property states, each spouse filing separately can only deduct an expense they actually paid. For expenses paid through a joint checking account in which you and your spouse have equal interest, the IRS will consider that each of you paid the bills equally.
For married couples in community property states, and for registered domestic partners in Nevada, Washington and California, medical payments made from community funds are divided equally. Each spouse or partner would claim half the expense as a deduction.
In one sense, the answer to "Are Medicare-inelliglble medical expenses tax-deductible?" is a simple "yes" since nearly all of those uncovered expenses are deductible. But the details about when and how to take the deductions can get complicated. You can find more information and instructions on the IRS and Medicare websites.