Hello to all my financially savvy followers! And to those who clicked on this link because they misread “tax-deductible” as “taco-edible,” welcome! We may not be offering crunchy shells filled with delectable toppings, but we do have a healthy serving of useful tax information for you.
Now, I can already hear the moans and groans of you tax-phobes out there. Stick with me, folks. Yes, taxes can be about as fun as a root canal, but we’re about to inject a little bit of Novocaine into the situation.
Let’s dive into today’s topic: Are health care costs tax-deductible? Or in layman’s terms, can your unexpected trip to the ER because you thought it would be fun to play tennis with a bowling ball count as a tax break?
Well, the answer is “kinda, sorta, maybe, it depends.” I know, I know, we all love precise answers, don’t we?
The fact is, certain health care expenses are indeed tax-deductible. However, there are a bunch of conditions and clauses involved that would make a tax attorney giddy with joy. For us regular folks, not so much.
First, let’s talk about the main guideline, which involves a figure I’m sure we all love – percentages. As of my knowledge cutoff in September 2021, only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income (AGI) can be deducted. This is called your “floor.” No, not the thing you were intimately acquainted with when you slipped on that banana peel. It’s a tax term.
Let’s say you have an AGI of $50,000. Your “floor” is $3,750 (7.5% of 50k). So, if you have $5,000 in medical expenses, you could deduct $1,250 ($5,000 – $3,750).
But wait, there’s more! Not all medical expenses count towards this deduction. The IRS has a list of what can and cannot be included, so don’t think you can get creative and include that mani-pedi as part of your “necessary health care.”
Your standard doctor visits, surgeries, psychiatric care, and prescription medications generally make the cut. However, the cost of that experimental leech therapy you tried out of desperation? Not so much.
Plus, if you’re insured, you can only deduct the costs you personally paid out-of-pocket, not anything your insurance covered. I hear some of you asking, “What about my premiums?” Good question! If they’re taken out of your paycheck pre-tax, then no. If you pay them yourself post-tax, then yes. Isn’t this fun?
Finally, remember that these deductions are only applicable if you itemize your deductions. If you’re taking the standard deduction, this isn’t going to apply to you. But let’s face it, if you’re taking the standard deduction, you’re probably not worrying about medical expense deductions. You’ve got better things to do, like perfecting your juggling-with-cacti routine.
I know this is a lot to digest, and it can be about as clear as mud. But hey, that’s why we have accountants and tax software, right?
Stay healthy, my friends. But if you can’t manage that, at least you now know there’s a slim chance you can make your misfortunes work for you at tax time.
Oh, and one more thing: maybe stick to regular tennis balls from now on, okay?
