Many people are unaware of the various ways they can reduce their tax bill, and one unexpected way is through medical expenses. While most medical expenses are covered by insurance, unreimbursed expenses may qualify for tax deductions. In this article, we’ll explore the rules around tax deductions for medical expenses and some surprising items that can be deducted.
What Medical Expenses Can Be Deducted?
According to WSJ tax reporter Laura Saunders, not all medical expenses are covered by insurance, and if they’re unreimbursed, they may be deductible as medical expenses on your tax return. Some examples of deductible medical expenses include the cost of a home elevator if someone is disabled, tuition for a special needs school, fees for assisted living and nursing homes, and even a swimming pool.
Yes, you read that right. In some cases, a swimming pool may qualify as a medical expense deduction. For example, if a doctor recommends a pool for a family member’s chronic illness, the cost of the pool may be deductible. However, the cost may not be fully deductible, and there are certain rules you must follow to qualify for this deduction.
To qualify for a swimming pool tax deduction, you must have a doctor’s note recommending it, and you must also have an appraisal of your home’s value before and after you make the improvement. If the improvement increases the value of your home, you must subtract that from the deduction.
Other examples of deductible medical expenses include bandages, breast pumps, guide dogs, contact lenses and contact lens solution, dentures, stop smoking programs, and obesity treatment. While you can’t deduct the cost of regular Band-Aids, if you have surgery and need special bandages, the cost may be deductible.
Who Qualifies for Medical Expense Deductions?
Not everyone will qualify for medical expense deductions. To claim these deductions, you must itemize your deductions on Schedule A of your tax return, and you can only deduct expenses that are greater than 7.5% of your adjusted gross income. If a couple had $200,000 of income, they couldn’t deduct the first $15,000 of eligible expenses.
According to the most recent data, only about 4 million tax filers out of 160 million took advantage of this deduction in 2020. However, the average deduction was $22,000, so it’s definitely worth exploring if you have significant medical expenses.
What Medical Expenses Aren’t Allowed?
While there are many medical expenses that can be deducted, there are also expenses that aren’t allowed. The IRS has a list of expenses that can’t be deducted, including cosmetic surgery, most over-the-counter medicines, and health club dues.
It’s important to note that even if an expense appears to qualify for a medical expense deduction, the IRS may challenge it. For example, if you claim a tax deduction for a swimming pool, the IRS may ask for proof that the pool is necessary for medical reasons.
In conclusion, tax deductions for medical expenses can be a valuable way to reduce your tax bill, especially if you have significant medical expenses that aren’t covered by insurance. While there are rules and limitations to these deductions, it’s worth exploring whether you qualify and what expenses can be deducted.