The 2018 tax overhaul brought about a number of changes -- some favorable for taxpayers, and others, not so much. One tax break you may be wondering about in its aftermath is the medical expense deduction. It used to be that if you spent a large chunk of your income on healthcare costs, you'd be eligible to deduct medical expenses on your taxes. And the good news is that the medical expense deduction is still alive and well. But whether you'll actually get to capitalize on it is a different story.
How the medical expense deduction works -- and why it's hard to snag
For the current tax year, you can deduct eligible medical expenses that exceed 10% of your adjusted gross income, or AGI. But to be clear, you can only write off healthcare costs above that 10% threshold.
Imagine your AGI is $60,000, and you spend $6,000 on medical expenses. In that case, you actually don't get a deduction, because to qualify, your costs must surpass $6,000. And if you rack up $6,500 in medical expenses with an AGI of $60,000, you only get to deduct $500 of them, not the entire $6,500. As such, this particular deduction is somewhat difficult to claim, especially if you're a higher earner with medical bills that are mostly run-of-the-mill.
But having to exceed that 10% of AGI threshold isn't the only reason why many filers ultimately don't deduct medical expenses on their taxes. A big part of it boils down to the fact that to claim the deduction in the first place, you need to itemize on your tax return. But since the standard deduction pretty much doubled once the 2018 tax changes went into effect, itemizing has become even less cost-effective for filers on a whole.
For the 2019 tax year, the standard deduction is $12,200 for individual tax filers, and $24,400 for married couples filing jointly. Keep in mind that the state and local tax (SALT) deduction, which covers property taxes on your home, is now limited to $10,000 per year under the new tax code. This means that if you're married filing jointly and are looking at $500 in deductible medical expenses plus that full $10,000 SALT deduction, you'd need to be paying a heck of a lot of mortgage interest, or have a long list of charitable donations, for itemizing to be on the table.
Claiming your deduction
Let's say you do have enough deductions for itemizing to make sense. In that case, you'll need to keep detailed records of your medical spending to ensure that you're claiming the right amount on your tax return. Thankfully, there are plenty of healthcare costs that qualify for the medical expense deduction, including:
- Doctor visit copays.
- Copays for medication.
- Prescription eyeglasses.
- Dental care.
- Hearing aids.
- Mileage to and from medical appointments.
You can't, however, take a deduction for medical treatments that are cosmetic in nature (in other words, you can't write off a face lift), nor do non-prescription pills, like herbal supplements, count. And if you're a pet owner, sorry, but veterinary costs aren't allowed either.
Another thing: If you got reimbursed for any medical expenses during the year from a flexible spending account or health savings account, then those reimbursed costs aren't deductible on your tax return. The same holds true if you incurred a medical bill from a provider, paid it, but then later got reimbursed by your health insurance company.
Though the medical expense deduction is a useful tax break for some people, it's not always easy to claim. Still, if you think there's a chance you'll qualify for it, make sure your records are complete. A good bet, in fact, is to scan receipts and other medical documents and store them electronically. This way, if physical papers degrade or get lost over time, you'll have a backup on hand when you sit down to complete your tax return.