You probably already know that some medical and dental expenses are tax-deductible, but are you aware that the IRS has set some deduction limits and “qualifying expenses” for all taxpayers?
Whether your spouse had surgery or you had to get some pricey dental treatments in 2011, you may only be able to deduct a portion of your expenses.
The IRS has set some specific rules about deducting medical and dental expenses, and for determining what really is a “qualifying” expense.
According to IRS guidelines, here are eight important things you should know about medical and dental expenses and your taxes:
1- Reporting medical and dental expenses.
You will need to itemize all of your medical and dental expenses right on Form 1040, Schedule A.
2- Deduction limits.
You are only permitted to deduct medical care expenses that exceed 7.5 percent of your adjusted gross income for the year. You are able to calculate this amount on Form 1040, schedule A.
3- You must have paid your expenses during the 2011 tax year.
Even if you pre-paid for services or treatment that you will actually use in 2012, you need to report it as a 2011 expense. The IRS will need to see receipts or records of any medical or dental expenses you paid in 2011.
4- Reimbursements aren’t deductible.
If you received any type of reimbursement on your medical and dental expenses, you won’t be able to deduct that amount on your tax return.
5- Qualifying expenses for different people.
You are allowed to include qualified medical expenses paid out for your own treatments, your spouse’s treatments, and your dependents’ treatments. Some exceptions apply for divorced or separated parents.
6- Types of qualifying expenses.
You are permitted to deduct all types of expenses that you paid for the following reasons: diagnosis of an illness; cure; mitigation; treatment or prevention of disease; and any treatment affecting any structure or function of the body.
You are also allowed to deduct the costs of prescription medication, insulin, and lactation supplies. Another valuable deduction: premiums for medical, dental, and long-term care insurance.
7- Qualifying transportation costs.
You can deduct the costs of transportation associated with qualifying medical expenses. For example, you would be able to deduct the cost of taxi fares, bus fares, train tickets, flights, ambulance costs, tolls, and parking fees incurred on your way to treatment.
If you used your own car for medical transportation, you would be able to deduct your own expenses such as the cost of gas and oil or use the standard mileage rate for medical expenses (19 cents per mile from January 1 to June 30, and 23.5 cents per mile from July 1 to December 31, 2011).
8- Tax free benefits.
Any distributions from Health Savings Accounts and any withdrawals from Flexible Spending Arrangements may be tax free if they were used to cover the costs of a qualifying medical expense. This includes the cost of prescription medication and insulin.