The IRS Medical Deductions Allowed – Is it always a good time to check?
By: David G. Parent, Esq.
Once upon a time — and this is unknown to most people born before 1950, Taxpayers took great careful track of their health care expenses. But then, the tax reforms in the 1980’s resulted in an exclusion of most medical expense deductions allowed (amounting to 7 and ½ percent of adjusted gross income). The result was that for many taxpayers, there essentially was not longer a deduction left, and so it became a habit to never track medical expenses. But the truth is, medical expenses can still be a valuable source of tax savings. But first, medical expenses need to be properly tracked.
Tracking medical expense deductions can still sometimes really pay off. Read this story below.
We recently had an older taxpayer who had just discovered that long-term healthcare insurance premiums were deductible. He then adjusted his QuickBooks accounts and came up with a substantial sum. He still did not believe that it would do him any good but gave the data to us to prepare amended tax returns. When he received the for review and signature, he was surprised to find that we had included the Long-term care and the Medicare Part B premiums, along with other medical deductions, and found that a huge number on allowable medical deductions on his Schedule A.
In going over the medical expenses worksheet, we found some items were not relevant because he had Medicare, Tri-Care and an excellent employer provided health care plan, however, we found a whole host of of allowable deductions:
- Item 3 (Fees for Doctors, etc.) excited his interest. He was finding that his health care plans did not cover all of his bills and co-pays.
- Item 7 (Eyeglasses and contact lenses) also interested him because his health plans had dropped covered for eye glasses.
- Item 9 (Medical transportation expenses.) especially intrigued him. “My wife and I are always going to the doctor and we are always picking up prescriptions. My doctor and dentist are not local. I bet that we are incurring some substantial transportation costs.”
While not directly affected, he found the long-term care premiums for children and dependents noteworthy. When he had placed long-term care insurance on his spouse, the salesperson noted that polices for younger people were important because they are susceptible to debilitating illnesses and injuries. A stroke or a bicycle fall can lay a young person up for the rest of his life. The premiums for a young person are also very low.
He now realizes, no matter your tax bracket, that it is important to keep careful track of all his medical expenses and medical travel. Currently he has a large envelope full of claim and prescription notices. At the end of the year he will organize the date into a spread sheet and be able to claim a large deduction. He plans to use the increased refund to take a vacation. He claims that saving money on taxes “will be good for my health.”
The IRSMedic concurs.