Although Medicare often comes with high out-of-pocket costs, you might be able to mitigate the hit to your finances by itemizing those medical expenses on your federal income taxes to lower your tax bill. Taxpayers are allowed to deduct the part of their medical and dental expenses that exceed 7.5% of their adjusted gross income (AGI).
For example, if your AGI is about $40,000, you would be able to deduct the amount of medical expenses over $3,000. ($40,000 X .075 = $3,000).
Is it worth the bother of tallying up your expenses? Possibly yes, especially in years when there are high medical and other deductible items that would exceed your standard deductions. Taxpayers must first run the numbers to learn whether itemizing deductions would produce more tax savings than simply going with the standard deduction.
In 2024 the standard deduction is:
- $14,600 for single filers,
- $29,200 for joint filers.
In addition, older taxpayers may qualify for an aged or blind deduction of $1,550 per person.
Whose expenses can you deduct? In addition to those of yourself and a spouse, you might be able to include medical expenses you paid for a qualified dependent, such as a person who meets the definition as a “qualifying relative” such as a mother, father, sibling, child, or grandchild.
The following is just a partial list of deductible expenses, but among those that are frequently overlooked:
Health insurance premiums including Medicare. This includes Part B which is easy to forget because it’s automatically deducted from Social Security benefits. The standard monthly premium in 2023 was $164.90, but if you have a higher income, your income related premium deduction could be hundreds more. Consult your Form SSA 1099 detail for the amount in Box 3. You can also deduct Part D premiums, those for Medigap supplements, or Medicare Advantage plan premiums (if any), as well as dental and qualified long-term care insurance premiums.
Transportation. You can include amounts paid for transportation “for, and essential to,” medical care. This includes what you pay out of pocket for ambulance services as well as what you pay for your own car expenses getting to appointments. You have a choice of either including actual out-of-pocket expenses such as the cost of gasoline and oil, or you can use the standard mileage rate which is 22 cents a mile from January 1, 2023. You can include parking fees and tolls.
Capital expenses. This includes both special equipment installed in a home and improvements such as modifications to accommodate a disabling condition (such as installing grab bars, modifying stairways, and lowering kitchen cabinets). Certain rules apply to how much you can include. Look for the Capital Expense worksheet in Publication 502, Medicare and Dental Expenses. See — www.irs.gov.
Nursing services. Includes wages and other amounts paid for nursing services. The services need not be performed by a nurse, if the services are of a kind generally performed by a nurse, including giving medication, changing dressing, as well as bathing the patient. The services can be provided in-home or at a care facility. Special rules apply to determine the amount that qualifies as a medical expense versus personal and household services. Learn more — IRS Publication 502, Nursing Services
Dental treatments. Includes what you pay for prevention as well as treatment of dental disease. This includes the services of a dental hygienist as well as the dentist, and procedures such as X-rays, extractions, dentures, and other dental problems.
Eye exams and eyeglasses. Includes medical expenses for eye examinations and what you pay for eyeglasses and contact lenses needed for medical reasons.
Be sure to keep records and discuss your deductions with a tax professional!
Learn more about what you might be missing in the way of deductible medical expenses with IRS Publication 502, Medicare and Dental Expenses — www.irs.gov.
