Medical bills can be a huge burden even if you have a decent insurance plan in place. Thankfully, the IRS allows you to deduct medical expenses on your taxes. As long as you submit an itemized return, you can write off eligible deductible medical expenses that exceed a certain percentage of your income. Keeping an accurate record of your medical bills will help you know what to claim come tax time, so be sure to track all of your health-related expenses throughout the year.

Medical Expenses

Image source: Getty Images.

What counts as a deductible medical expense?

To claim the right deduction on your taxes, you'll need to know which medical expenses qualify. Generally speaking, you can deduct any out-of-pocket cost you incur for preventative care or medical treatment, including dental and vision care. In-office and prescription co-pays count as deductible medical expenses, as do medical appliances, such as hearing aids, crutches, and wheelchairs. You can also write off the cost of prescription eyeglasses and contact lenses. The IRS maintains a comprehensive list of deductible medical expenses on its website that you can consult when you prepare your taxes.

Furthermore, you're allowed to deduct the expenses you incur for traveling to and from treatment centers, including mileage on your vehicle and parking. You can't, however, deduct medical expenses that your insurance provider reimburses you for. Furthermore, you can't deduct the cost of cosmetic procedures or non-prescription drugs.

Requirements for claiming deductible medical expenses

Though you're allowed to deduct eligible medical expenses to lower your tax liability, you can only do so if your out-of-pocket costs for the year exceed 10% of your adjusted gross income. Let's say your adjusted gross income for the year is $50,000, and you rack up $6,000 in medical bills. In that case, you'd be able to take a $1,000 medical expense deduction.

Now if you're a senior looking to claim a medical deduction this year, you get a little more leeway. As long as you're 65 or older, you can claim a deduction for medical expenses that exceed 7.5% of your adjusted gross income; you don't need to reach that 10% threshold. However, this provision runs out at the end of 2016, at which point you'll only be able to deduct expenses that exceed 10% of your income.

In order to claim a medical expense deduction, you must itemize on your tax return. Depending on your situation, it could make more sense to take the standard deduction rather than itemize, so be sure to run the numbers to see which scenario works out the most in your favor.

How much do you stand to save?

When taking a medical expense tax deduction, it's important to understand that you won't actually get back every dollar you claim. While a tax credit reduces your taxes dollar for dollar, tax deductions simply reduce your taxable income, and your savings ultimately depend on the effective rate at which you're taxed.

Let's say you earn $50,000 a year and your effective tax rate is 25%. If you're eligible for a $2,000 medical expense deduction, you'll reduce your taxable income to $48,000, which will result in a savings of $500. But you won't get to subtract that $2,000 directly from your tax liability.

Claiming deductible medical expenses could help you lower your taxes, so don't forget to save your receipts every time you shell out a co-pay or incur any sort of unreimbursed cost. Furthermore, if you use your vehicle to get to and from medical appointments, make sure to keep a detailed mileage log so you know how much to claim on your taxes. Though you're absolutely allowed to write off legitimate medical expenses as a deduction, it's important to be precise with what you claim to avoid IRS problems down the line. 

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.