Deducting Medical Expenses
This chapter is a free excerpt from Ask the TaxGirl: Everything Parents Should Know About Filing Taxes (Including Child Care Expenses, Medical Costs, and the Earned Income Tax Credit.
One of the things that learned as a result of her illness is how quickly medical expenses can add up—and I have good insurance. I have written post after post about what you can deduct in medical expenses but have rarely been in the position to take my own advice. My oldest daughter spent the first few days of her life in the NICU at Children’s Hospital of Philadelphia (CHOP); my youngest two have had minor surgeries (tonsils and adenoids); and my little boy—all boy—has seen to it that I’ve seen the inside of the ER (stitches at 2!). But those things were more or less one or two trip events. But with Amy’s HSP, we found ourselves driving back and forth to the doctor several times a week for testing, and to CHOP and St. Chris’ Hospital to have the specialists in nephrology check out her kidneys. The expenses added up quickly. Here’s a quick look at what we (and you) can deduct—and what you can’t.
But—and this is a big but—let’s get the basics out of the way. I can claim medical expenses for my daughter because:
- I itemize my expenses. You must claim the itemized deduction on a Schedule A in order to claim a deduction for medical expenses.
- Amy is my qualifying dependent so I can deduct medical expenses paid on her behalf and
- I understand that I can only deduct those expenses which exceed 7.5% of my adjusted gross income (AGI).
Co-pays. We have decent medical insurance but we are still subject to co-pays. I pay $20/visit to the doctor (a few of those trips this month) and $100/visit for the ER.
Lab fees. My insurance covers some of our lab fees, but not all. She had several tubes of blood work and many cups of urine (four in one day) analyzed for protein counts, white blood cell counts and other abnormalities. Those fees not covered by our insurance, those that we pay out of pocket, are deductible.
Transportation costs. Luckily, my pediatrician’s office is walking distance from my house (about 2.5 miles) but in really cold or snowy weather, we’ll take the bus or drive. The bus fare is deductible—as is the mileage to and from the doctor. The standard medical mileage rate for 2012 is 23 cents per mile. Yes, I could also take the actual expenses associated with driving but I’m just not that organized at times like these.
CHOP is in the city, so we generally take a bus, train or drive to the hospital. The bus fare, train fare or car mileage is deductible.
Also deductible? The ridiculous cost of parking in the city.
And if I lived in New Jersey (shudder) and had to pay the toll to come into the city, that would also be deductible.
Lucky for us (and my record keeping), parking fees and tolls are deductible regardless of whether we use the actual expenses method or the standard medical mileage rate.
Even though I’m not the patient, the cost of my transportation is also deductible, since transportation expenses of a parent who must go with a child who needs medical care are deductible. My friends who often go with me for moral support to these things? Much appreciated, but not deductible.
We didn’t have to stay overnight (thank goodness) but if we had, we could deduct up to $50 for each night per person. My expenses would have been covered for same reason my transportation would have been included (because I’m the mom)—but only to $50. You and I both know that I couldn’t stay anywhere in Philadelphia that wouldn’t cause my mother to cry for $50 . . . Considering that the best medical facilities for children, like Children’s Hospital of Philadelphia and Children’s Hospital of Boston, tend to be located in metropolitan areas, you’d think that those numbers would push up a little higher (Congress, a little help on this one, please?).
Thankfully, we don’t need any longer term options—like retrofitting our house with ramps, etc. Amy is a little gimpy now but the prognosis is 100% back to normal. But for parents who have to make accommodations or renovations in their home for sick or disabled children, it’s deductible.
So, what can I not deduct?
The cost of child care. I have two other children that I did not relish dragging with me to the pediatrician, or to CHOP for goodness knows how long. I am lucky in that we have fabulous friends who were willing to watch my children while my husband and I went to the hospital with Amy. But if that didn’t happen, I would have had to get a babysitter. Believe it or not, that’s not deductible as a child care expense. You cannot deduct the cost of child care, even if it enables you, your spouse, or your dependent to get medical treatment.
Our meals. Since we were at the hospital for most of the day, my husband and I missed lunch. Can we deduct the cost of the munchies that we ended up getting from the hospital snack shop? Sadly, no. You can’t deduct the cost of meals that are not part of inpatient care.
Over the counter medicines. The doctor recommended—but did not prescribe—a number of over the counter medicines to keep Amy’s symptoms at bay. Despite the fact that some of them can run $10/bottle (have you seen the cost of children’s Motrin lately?), they’re not deductible. Except for insulin, you cannot deduct the cost of medicines that are not prescribed.
Personal care products. Amy used a number of products that don’t qualify as medicines but were part of keeping her comfortable. She had an itchy, scabby rash all over her body—and I mean all over her body. She cries sometimes when she changes clothes and the rash keeps her up for hours and hours. Oatmeal baths and certain lotions are quite soothing for her. But since they’re not prescription-based, we can’t deduct them.
A lesson to be learned here? If the costs of these treatments are substantial, you may be able to deduct them by having your doctor write a prescription for them. This varies by drug and by doctor.
I know that we are super lucky because the outlook for Amy is 100% recovery. Not all parents have that outcome. And as a mom, my heart goes out to them.
When children get sick, it can take quite a toll on a family. In addition to all of the worries and practical considerations, it can be quite expensive. Fortunately, with a little bit of tax planning, you can mitigate some of the expense and focus on what really matters: getting those kids better.
Health Insurance Premiums (& Medicare)
Last year, I lost my job. I haven’t found a full time job yet so I have been paying for my health insurance out of pocket by COBRA. Is this deductible on my taxes? A friend told me that it was but I thought only visits to the doctor and prescriptions were. Thanks for any help you can give me. It’s a tough time and any money that I can save is good.
I’m sorry to hear about your job situation! I know there are a lot of folks in similar boats these days. Hopefully, the economy will turn around sooner rather than later . . . As to your question, absolutely yes! Health insurance premiums which are not reimbursed by an employer are definitely deductible, provided that you otherwise qualify (meaning that you itemize your deductions on a Schedule A). It’s important to note that the expenses are only deductible to the extent that they exceed 7.5% of your adjusted gross income. So, for example, if your AGI was $40,000, you can only deduct expenses which exceed $3,000 (7.5% of $40,000). Of course, when it comes to health insurance premiums, you’re likely to hit that number more often than not. And please don’t think that only visits to the doctor and prescriptions are deductible! There are a host of medical and dental expenses that you can deduct. Check out a list of deductible medical and dental expenses—I’m sure that you’ll find some that you can use! Good luck!
Health Insurance Premiums for Family
Hi Taxgirl . . . Quick question . . . I live in CA My current employer, as part of his benefit plan, pays for my medical insurance. If I want to get medical for the rest of my family, I have to pay extra. According to someone who works here, they claim that is deductible as a medical expense under Schedule A . . . is that correct? Just wondering . . . Let me know at your convenience Love your site . . . keep up the great work!
Absolutely! You can claim the cost of the “extra” health insurance as a deduction on Schedule A so long as the expenses are for you, your spouse and/or your dependents. Those expenses aren’t just limited to health insurance for your family. Look for my prior post which lists other health care-related expenses that would qualify for the medical deduction.
Health Care Benefits and Taxes + “Obama-care”
My brother works for a company who pays $12K a year for his health insurance He is 64, single, no children, no ex-wife My brother understands starting in 2011 the government will treat the $12K as income and he will be taxed on it Also because it is over $8,000 a year it is considered a Cadillac plan and he will also have to pay a 40% penalty on the extra $4K So he estimates he will have to pay an extra $450 a month in extra taxes Is this fact ? Will this be worse for married couples with children? Thanks in advance.
*Sigh* This is the problem with the health care bill. It’s so giant that very few people have read it (including many in Congress). It’s no wonder, then, that many taxpayers are confused about what it actually means for them. I think your brother is one of them; it sounds like he’s operating under a couple of misconceptions. Let me see if I can clear it up for him. For tax years beginning after December 31, 2011 (the fancy way of saying the 2012 tax year), employers will be required to report health care benefits on a form W-2. This is a reporting requirement. It is not a taxing requirement. In other words, your health care benefits won’t be taxed any differently for the 2011 (or 2012) tax year as they were for 2010.
In fact, there is not a provision in the new law to tax health care benefits for individual taxpayers. If you receive one of those chain emails stating otherwise, ignore it. It’s a fake. If you want to see for yourself, the reporting requirement is at section 9002 of the new law. With respect to the Cadillac plans, the excise tax on these plans is not effective until 2018. The amounts have increased so that the threshold amount for singles is $10,200 and the threshold amount for families is $27,500.
There are some exceptions to those amounts (they’re higher in some instances) and they are indexed for inflation. More importantly, the tax is on the insurer, not on the insured. (Do I think that those amounts will eventually be passed along to the consumer? Sure I do. But for now, it’s not a direct tax.) This provision is located at section 9001 of bill and section 1401 of the reconciliation bill. You can read my original summary of some of the highlights of the law here. And if you want to read the whole kit and caboodle—all 906 pages of it—you can download it as a pdf. The reconciliation act—just 55 pages—can also be downloaded. I hope that clears up some of the confusion!
Contacts, Glasses, and Other Medical Expenses
My friend says that you can deduct contacts on your taxes as medical costs. I thought you could only deduct doctor’s visits. Can I really take those off of my taxes? What about glasses?
If you itemize your deductions, you can absolutely include the cost of contacts and glasses as medical expenses—you can also deduct the cost of your visit to your eye care professional. Those are legitimate health care expenses. In addition to the costs paid to your health care providers, you can include the cost of getting to and from your health-related visits, including parking. Look for for a list of additional medical expenses which may be deductible. Medical expenses are reported on Schedule A of your 1040. Keep in mind that those expenses are only deductible to the extent that they exceed 7.5% of your adjusted gross income. Here’s a quick example: Your medical expenses total $4,000 and your AGI is $20,000. You can deduct $2,500 of medical expenses: $4,000 (total expenses) less $1,500 (7.5% of $20,000).
Birth Control Costs
I have a weird question. My insurance doesn’t cover the cost of my birth control pills. Can I deduct them on my taxes? What about other forms of birth control, like condoms? Thanks.
Wow, I didn’t realize that there were any insurance companies left that didn’t offer coverage for birth control pills. But that said, yes, you can absolutely deduct the cost of birth control pills as a medical expense. Keep in mind that to actually take advantage of the deduction, you need to itemize your deductions—if you file with the standard deduction, the deduction isn’t available. You report medical expenses on Schedule A of your form 1040. Unfortunately, there are some limits: medical expenses are only deductible to the extent that they exceed 7.5% of your adjusted gross income (AGI). This means if your AGI is $30,000, you’d have to rack up $2,250 in medical expenses before you can claim any of the expenses. For a list of what else might qualify, check out my prior post on medical expenses. Almost anything that requires the services of a physician would qualify—IUD, Norplant, etc. Additionally, the costs of sterilization for women and vasectomies for men are deductible. What you won’t see on that list are other non-prescription forms of birth control, like condoms. As a general rule, non-prescription drugs and medicines, as well as “personal use items,” are not deductible.
Paying someone else’s health care expenses
Hi Taxgirl. I’ve searched all over the Internet and the IRS.gov website and I can’t find an answer to my question, so I’m hoping you can answer it: My sisters don’t currently have healthcare insurance, so my mom is helping them with some of their healthcare bills and expenses. My understanding is that this is not subject to taxation or reporting as long as the payments are being made directly to the healthcare providers. My question is: can my mom instead make premium payments for healthcare insurance for them or does this somehow not qualify in the same way as direct healthcare payments? I know that in personal income tax deductions, premiums can be deducted along with medical expenses, but for gifts, if payments must be paid directly to healthcare providers, than I’m not sure if a healthcare insurance company is consider a healthcare provider or not. Thanks very much.
I think you might be confusing two kinds of tax. What your mother is doing for your sisters, assuming that they are not your mother’s legal dependents, is making gifts to them by paying their expenses. Currently, under the gift tax laws, your mother may gift up to $13,000 per person per year. If your mother handed your sisters a check and then they paid health care expenses personally, that amount would be included in that “annual exclusion” amount of $13,000; if your mother exceeds that amount in any year, she would file a gift tax return. However, to the extent that she pays the money directly to the provider, that amount is excluded from the $13,000 and is not includable or reportable. This amount—since it is a gift—is not reportable by or taxable to your sisters. But with respect to income tax, your mother likely cannot deduct any of the health care expenses paid on behalf of your sisters. This is because a taxpayer may only claim income tax deductions for expenses paid for the taxpayer, the taxpayer’s spouse and your dependents. If your sisters qualify as your mother’s dependents (I’m guessing not so from your question), then yes, the health insurance premiums would be treated exactly as any other health expense and would be deductible if paid to the health insurance company (or agent). I hope that helps.
Autism & Special Needs Children
My husband and I have a 4 yr old daughter diagnosed with autism (higher functioning). We are considering enrolling her in a private preschool that has a program specifically designed to help children with autism, something the public school system cannot offer. The yearly tuition is $22,000. Can any of this be tax deductible?
This is one of those questions that feels like it should be easy but it’s not. There are a couple of options and a few restrictions. So let’s take it in pieces . . . Private school tuition is generally not deductible. However, private school tuition for grades below kindergarten (i.e. preschool and daycare) is deductible if it would otherwise qualify as childcare. So to the extent that the program would qualify as childcare, the preschool tuition would be deductible until she enters kindergarten. For grades kindergarten and above, the tuition would be deductible to the extent that you could separate the education piece from the childcare piece. This would apply if you enroll her in a full day program (usually including before or after care), for example, when the educational component stops mid-day. All of that said, you may be able to take a deduction for tuition as a medical expense, assuming that you itemize. I say may because there are restrictions.
The IRS allows a deduction for medical expenses for “payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body.” In some cases, this may include tuition for special schools for children with special needs if the primary reason for the school is related to the medical condition. In other words, it can’t just be that the school would be a “better” school for your child or that the school offered an extra program or certain atmosphere that you thought would be beneficial. Additionally, a doctor must recommend that your child attend the school (be prepared to back this up). So who qualifies? The IRS has traditionally allowed tuition as a medical deduction for children who are deaf, blind or have learning disabilities. In recent years, the IRS has also allowed medical deductions for educational programs for children suffering from depression, ADD and severe effects of substance abuse. The key is whether there’s an actual medical need by the child for the specific program. Aides and tutors hired to assist special needs children may also be claimed as medical expenses (assuming, again, that they are medically necessary). Keep in mind that to the extent that your insurance company covers the costs of any of these treatments, you may not deduct the portion which is covered or reimbursed to you. I hope that helps!
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