Tax Topic

Medical Expenses

Medical expenses are deductible, but most taxpayers do not realize a tax savings. This is because there is a "floor" that must be reached before any medical expenses are included in your itemized deductions, which would then lower your income and income tax.

The "floor" is 10% of your Adjusted Gross Income (AGI) (7.5% if 65 or over). Roughly speaking AGI is your total income before itemized deductions and exemptions. For most people, AGI is the total of gross wages, interest & dividends, net self-employment income, capital gains, net rental income, net farm income, taxable Social Security benefits, retirement/pension distributions, and gambling or other miscellaneous income less retirement contributions, ½ self-employment tax, and some other items.

For example, if your AGI is $80,000, your medical expense floor would be $8,000 (10% of $80,000). This means that you can only deduct medical expenses paid in excess of $8,000. When giving us your tax information, give us your total medical expenses -- we will calculate the "floor" and deductible amounts.

Medical expenses include doctor/dentist costs, lab fees, prescription drugs, mileage for medical purposes at 19 cents/mile for 2016, etc. They also include health insurance premiums if not paid pre-tax, including Medicare Part B premiums, as well as long-term care insurance premiums. Let us know if you have a specific expense you'd like to check on. Medical expenses generally do not include non-prescribed, over-the-counter medications.

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