Are My Medical Expenses High Enough to Deduct From My Income Taxes?
Q: I was diagnosed with cancer in 2019 which required surgery and considerable follow-up treatment. I also required extensive dental work during the year. My medical and dental expenses alone totaled more than $13,000, and that does not include my husband’s premiums and out-of-pocket costs, which were close to $6,000. Will we be able to deduct these expenses on our income taxes? We were unable to deduct our routine medical costs last year.
A: New legislation retroactively extends several tax breaks that affect the amount you may deduct in unreimbursed medical expenses. The lower threshold for itemized medical expense deduction was one of the breaks extended. The threshold under the 2017 tax law was originally scheduled to rise from the excess of 7.5% of adjusted gross income (AGI) to 10% of AGI for the 2019 tax year. But new legislation extended the 7.5% AGI level.
That said until you crunch the numbers it’s hard to say whether itemizing your medical expenses or taking the standard deduction would be the better option.
Here’s a hypothetical example to illustrate the math: Let’s assume that you double check your expenses and discover some commonly over-looked medical expenses (such as transportation mileage to and from the doctor appointments). With that, and your husband’s medical expenses, let’s assume that your medical expenses total $20,000, and that your AGI is about $50,000. Seven and one-half percent of $50,000 is $3,750. That leaves $16,250 in excess medical expenses that you might potentially deduct.
On the other hand, the standard deduction for 2020 has increased slightly and is $24,800 for married couples filing jointly. In addition, if both you and your spouse are age 65 and older you add an extra $1,300 to the standard deduction for a total standard deduction $26,100. That means your total itemized deductions will need to be higher than $26,100.
Here are some other deductions you might be able to itemize:
- State and local property taxes up to $10,000.
- Interest on a home mortgage on loans up to $1 million if you signed your mortgage prior to December 15, 2017, or up to $750,000 on loans signed after that date.
- Charitable contributions, and the donation of goods, provided you have receipts for the donations.
- Net qualified disaster losses from a federally declared disaster.
Keep in mind that this is not a comprehensive list or tax advice, but provided to give you an idea of the steps you need to take to learn how to reduce your tax bill. TSCL strongly recommends that you get help preparing your taxes from a tax professional who can explain your options and get you every tax break to which you’re entitled to.
To learn more about what you may itemize and how much you can deduct, visit www.IRS.gov and download instructions for Schedule A Form 1040 Itemized Deductions.
For a complete list of qualified medical expenses, see IRS Publication 502.