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Tax Deductions on Medical Expenses: Why So Few Take Them

In the heart of tax time, everyone's looking for ways to cut their taxes. Yet even though medical deductions are available to reduce your tax bill, relatively few taxpayers take advantage of them. Why?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, explains why the medical expense deduction is so hard to claim. First, Dan notes that you have to itemize in order to get any benefit from the deduction, as those taking the standard deduction get no extra benefit. Moreover, Dan goes on to point out that you're only allowed to deduct amounts above 10% of your gross income. That's a huge hurdle for most working families, and Dan reminds viewers that amounts that UnitedHealth Group (NYSE: UNH  ) , WellPoint (NYSE: WLP  ) , and other health-insurance companies reimburse you on medical expenses isn't eligible for the deduction. Dan concludes that retirees are the most likely to take the deduction, yet their income is usually so low that the deduction does them little good in producing tax savings.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 23, 2014, at 4:27 PM, jake2014 wrote:

    While it's difficult to get the deduction on the Federal return, AZ allows the full amount of reimbursed medical expenses on the AZ return. This allows many of my clients to itemize on their AZ return even though they don't itemize on the Federal return.

  • Report this Comment On March 24, 2014, at 1:30 AM, marofish8 wrote:

    My H&R Block program says if "both you and your spouse was born before January 2, 1949", the deduction starts after the first 7.5% of income.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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