Can I Deduct My Medical Bills on My Taxes?

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KEY POINTS

  • Many people spend a lot of money on healthcare each year.
  • You may be able to deduct some of your medical expenses on your taxes, but many filers won't get this option.


The quick answer? It depends.

Even if you're a fairly healthy person and have decent health insurance, you may still rack up your share of medical bills. And those bills can be a huge burden.

It's not uncommon for people to have to dip into their savings or rack up debt when medical bills start showing up. And while you can do your part to budget for those expenses, you never know when an unplanned injury or illness might cause your costs to spike.

If you commonly spend a lot of money on medical expenses, you may be wondering if you'll have the option to deduct those costs on your taxes. The answer depends on how much your bills amount to and the approach you're taking to file your tax return.

The rules of medical deductions

There is such a thing as a medical expense deduction, and for the 2021 tax year (which is the year you're filing taxes for this year), you can deduct expenses that exceed 7.5% of your adjusted gross income (AGI). (Note that this percentage has the potential to change for future tax years.)

Let's say your AGI for 2021 comes to $60,000, and you spent $6,000 on medical bills last year. That means you spent 10% of your AGI on medical expenses.

But that doesn't mean you get a $6,000 tax deduction. You can only deduct expenses above 7.5% of your AGI.

So, 7.5% of a $60,000 AGI is $4,500. If you spent $6,000 on medical costs last year, that means you're left with a $1,500 deduction only.

What’s more, you can only deduct medical expenses you were not reimbursed for. If you put $1,000 into your flexible spending account and then racked up a $1,000 hospital bill you were able to pay yourself back for, that $1,000 can't count toward calculating your deduction.

But having unreimbursed medical expenses exceeding 7.5% of your AGI is only one criteria you'll need to satisfy to claim a medical deduction on your taxes. You'll also need to itemize on your tax return rather than claim the standard deduction.

In 2021, the standard deduction is as follows:

  • $12,550 for single tax-filers and married couples filing separately
  • $18,800 for heads of household
  • $25,100 for married couples filing jointly

Now, let's say you're single and don't own a home, so the only itemized deduction you'd be able to take is a $1,500 medical expense deduction. Since the standard deduction you'd be entitled to is much higher -- $12,550 -- it would make no sense for you to itemize. In that case, the medical expense deduction would be off the table, even if you racked up enough bills to exceed 7.5% of your AGI.

Know the rules

There are plenty of deductions available to tax filers, but the medical expense deduction tends to be a harder one to claim. If you're not eligible for a medical expense deduction, it pays to see what other tax breaks you're in line for. There are even a few deductions you can take if you don't itemize on your tax return, like IRA contributions, so it pays to read up on current tax rules to eke out the most savings.

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