Maximizing the medical expense deduction

If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid in 2024 for medical and dental care for yourself, your spouse and your dependents. Here are some facts the IRS wants you to know about medical and dental expenses.

For the 2024 tax year, you can deduct only the amount by which your total medical-care expenses for the year exceed 7.5 percent of your adjusted gross income (AGI). For instance, if your AGI is $100,000, then un-reimbursed medical expenses have to exceed $7,500 ($100,000 x 7.5 percent).

You can only include the medical expenses you paid during the year. These expenses must be reduced by any insurance reimbursement. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.

You may include qualified medical expenses you pay for yourself, your spouse and your dependents. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child. You can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn’t meet the gross-income test.

A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental illness. The cost of drugs is deductible only for those requiring a prescription, except for insulin.

Nondeductible medical expenses include cosmetic surgery not related to a congenital abnormality, an accident or a disease; drugs not approved by the FDA; and funeral, burial or cremation expenses.

You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train or ambulance may be deducted. If you use your car for medical transportation, you can deduct the standard mileage rate for medical expenses. Don’t forget to add parking and tolls.

Some employees may be eligible to set up a medical Flexible Spending Accounts (FSA) with their employer. FSA plans permit employees to save pre-tax money using payroll deductions, and then submit various medical expenses for reimbursement. The maximum amount eligible for the FSA program is $3,200 per individual, working married couples may double this amount.

Individuals can set up a Health Savings Account (HSA) either themselves or through a group plan with their employer. This is a pre-tax savings account. Unlike FSAs, HSA plans do not have a “use it or lose” feature for accumulated savings. HSA holders can use their savings fund to pay for medical expenses on a tax-free basis.

For a list of medical and dental expenses, see IRS Publication 502, “Medical and Dental Expenses.”

Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.