ôô

Deduction Dangers, Part 3: Medical and Dental Expenses

Find out which medical and dental expenses are deductible and how to claim them on your taxes—plus, some tax traps to avoid.

By
Laura Adams, MBA
April 2, 2012
Episode #262

Page 1 of 4

In the first installment of this 3-part Deduction Dangers series, I told you about the mortgage interest deduction and some common mistakes that can trip up homeowners. In the second installment, I told you how to deduct your job-related expenses and a few exceptions and dangers to avoid.

In this final installment, I’ll tell you which medical and dental expenses can help lower your tax bill and how to claim them.

What is the Medical and Dental Tax Deduction?

What may surprise you about the medical and dental tax deduction is the wide variety of expenses allowed by the IRS. To make sure you don’t miss any, it’s a good idea to get familiar with the complete list.

Before we get into specific expenses, it’s important to know that qualified medical expenses are “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatments affecting any structure or function of the body.”

When you pay for medical and dental care for yourself, your spouse, or your dependents, you’re entitled to deduct the amount that exceeds 7.5% of your adjusted gross income or AGI.

Let’s say you have AGI of $50,000 in 2012 and you spend $4,000 on qualified medical expenses. When you multiply $50,000 by 7.5%, you find that you’d need a minimum of $3,750 ($50,000 x 7.5%) in total medical expenses to qualify for this deduction. So if you had $4,000 in medical expenses, you could deduct any amount over the threshold of $3,750, or just $250 ($4,000 - $3,750)—not the full amount of $4,000.

And by the way, starting in 2013, the threshold for the medical deduction will get bumped up from 7.5% to 10% of AGI, making it a little more difficult to take advantage of.

Pages

Related Tips

Facebook

Twitter

Pinterest