If you have a high-deductible health plan, or no plan at all, it's possible you spent money on health care in 2010. Keep in mind the Internal Revenue Service (IRS) allows you to deduct some of those expenses, if you meet certain criteria.
Qualifying expenses include those spent on yourself, your spouse and your dependents, and include both medical and dental expenses. The test by which you can determine whether you have a medical expense tax deduction has to do with the total amount of your expenses and how much you earned last year.
You may deduct only the amount by which your total medical care expenses for the year exceed 7.5% of your adjusted gross income (AGI). You do this calculation on Form 1040, Schedule A in computing the amount deductible.
For example, let's assume your AGI is $40,000. If you mulltiply that amount by 7.5% you get $3,000. If you paid $5,000 in medical expenses in 2010, which get to write off the amount that exceeds $3,000, which is $2,000. However, if you paid medical expenses totalled $2,500, you may not deduct any of your medical expenses because they are not more than 7.5% of your AGI.
What counts as medical expense?
A deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body.
These expenses include payments for legal medical services rendered by any medical practitioner and the cost of equipment, supplies, and diagnostic devices used for medical care purposes.
Medical expenses include insurance premiums paid for medical care or qualified long-term care insurance. The deduction for a qualified long-term care insurance policy's premium is limited. If you are self-employed and have a net profit for the year, you may be able to deduct (as an adjustment to income) amounts paid for medical insurance for yourself and your spouse and dependents.
You cannot take this deduction for any month in which you were eligible to participate in any subsidized health plan maintained by your employer or your spouse's employer. If you do not claim 100 percent of you self-employed health insurance deduction, you can include the remaining premiums with your other medical expenses as an itemized deduction on Form 1040, Schedule A. You may not deduct insurance premiums paid by an employer-sponsored health insurance plan (cafeteria plan) unless the premiums are included in Box 1 of your Form W-2.
Medical expenses may include:
- Fees paid to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and Christian Science practitioners for medical care expenses
- Payments for hospital services, qualified long-term care services, nursing services, and laboratory fees including the incidental cost of meals and lodging charged by a hospital or similar institution if your principal reason for being there is to receive medical care
- Payments for acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction are also deductible medical expenses. You may include amounts you paid for participating in a smoking-cessation program and for drugs prescribed to alleviate nicotine withdrawal
- The cost of participating in a weight-loss program for a specific disease or diseases, including obesity, diagnosed by a physician. In general, you may not deduct the cost of purchasing diet food items or the cost of health club dues
- The cost of drugs is deductible only for drugs that require a prescription, except for insulin
- Admission and transportation to a medical conference relating to the chronic disease of yourself, your spouse, or your dependent (if the costs are primarily for and essential to the medical care). However, you may not deduct the costs for meals and lodging while attending the medical conference
- The cost of items such as false teeth, prescription eyeglasses or contact lenses, laser eye surgery, hearing aids, crutches, wheelchairs, and guide dogs for the blind or deaf, and
- Transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance can be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees
The medical care deduction is fully explained in IRS Publication 502.