Overlook This in Your Itemized Deductions and Risk Losing Money

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You might be spending more on this than you think, and your tax bill might be too high as a result. Keep reading to find out why. [[{“value”:”

The majority of Americans use the standard deduction when they file a tax return, but itemizing can still make sense for many people — especially those who live in areas where state taxes are high or those who pay a relatively high interest rate on their mortgage.

One of the most often overlooked deductions available is for medical expenses. While it might seem like few people would qualify for it, it actually includes significantly more of your expenses than many people would expect.

The medical expense deduction

Here’s the short version. The IRS allows taxpayers who itemize to deduct their qualifying medical expenses that exceed 7.5% of their adjusted gross income (AGI). For example, if your AGI is $100,000, this means that qualifying medical expenses greater than $7,500 can be deducted.

To qualify, medical expenses must be unreimbursed. So you can’t simply claim an expense that your insurance ended up paying 80% of. You also can’t claim any medical expenses paid through a tax-advantaged account like an FSA or HSA. You can, however, count medical expenses that you put on a credit card or borrowed money for. But as we’ll see in the next section, there are more expenses that count than you might expect.

Not as high of a bar as it seems

As mentioned, you might be surprised at how much you’re actually spending on qualified medical expenses every year. The following all count as medical expenses for the purpose of the medical expenses deduction (and this is not an exhaustive list):

Unreimbursed payments for medical care and treatmentCo-pays and out-of-pocket costs for surgeries and other proceduresDental care, including the cost of artificial teethVision care, including the cost of glasses and contactsPayments made to psychiatrists or psychologistsPrescription medicationHearing aidsAny capital expenses to your home if the main purpose is related to a medical condition (such as entrance/exit ramp or adding grab bars in a shower).Chiropractic careFertility treatments and pregnancy testsLong-term care servicesMedical insurance premiums you pay out-of-pocket (this usually excludes employer-sponsored plans)Expenses you pay to travel to receive medical care

The IRS publishes a thorough list of medical expenses that could be deductible, so see if any of yours qualify.

One smart exercise you might want to do is to go through your bank and credit card statements to see how much you’ve spent on medical care in a certain amount of time (ideally a full year). Then compare this figure to 7.5% of your income.

Could the medical expense deduction save you money?

As mentioned, in order to claim the medical expense deduction, you’ll need to itemize deductions on your tax return. This only makes sense if all of your deductions add up to more than your standard deduction. For 2024, the standard deduction is $14,600 for single taxpayers and $29,200 for married couples filing jointly.

There are a few others, but for the most part, there are four major itemizable deductions:

Mortgage interest (on up to $750,000 of qualifying debt)Charitable contributionsState and local taxes (up to $10,000)Medical expenses that exceed 7.5% of AGI

A quick estimate of how much you pay for each of these four categories can help determine if itemizing could be worthwhile to you. If it is, and you have substantial qualifying medical expenses, this deduction could potentially save you hundreds or even thousands of dollars on your taxes.

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