Wondering if you can deduct your medical expenses? This is the only video you need to watch!
The Medical Expense deduction allows you to deduct medical expenses above 7.5% of your AGI. Note that the 7.5% is a floor, and only the amount spent above that floor can be deducted.
Not everything qualifies but many things do. You may even be able to deduct expenses spent on aging parents, like long-term care expenses that are not reimbursed by insurance.
Watch this short video to learn the ins and outs!
Transcript:
Do you have substantial medical expenses and you're wondering if you can use that as a tax deduction? We're going to cover that in this video. I'm Chris Kaminski, co-founder and partner here with Consilio Wealth, where we specialize in working with tech professionals at Amazon, Microsoft, Meta, and Google.
Medical expense deduction, if you spent more than seven and a half percent of your AGI, your adjustable gross income, for medical expenses, you might qualify for a deduction. Note that these seven and a half percent is a floor. So, let's say that you make a hundred thousand dollars a year and you spent eight thousand dollars on medical expenses in the last year. The first $7500 of that, which is the floor, seven and a half percent of $1,000, you don't get to take a deduction for that. Only the amount above that.
So, in this case, the $500, the difference between $8,000 and $7,500, you'd be able to take a deduction for that. What is deductible? So only unreimbursed payments are deductible. So, these are things like dental care, medical care, surgeries, even transportation to and from a doctor's office, you can qualify under this deduction. But anything that is reimbursed, you cannot. So, let's say that you spent $5,000 on a medical expense and you had money in an HSA or an FSA that you used to reimburse yourself with for that expense. Of course, that is not deductible.
That's because you get a tax benefit for putting money in the HSA or FSA, and so you don't get to win on both sides. It's also worth noting that certain long-term care expenses that land above this 7.5% threshold that are not reimbursed by insurance, whether that's Medicare, Medicaid, or long-term care insurance, those expenses qualify for deductions potentially as well. Again, above that 7.5% floor.
It's also worth noting that if you pay for some of those expenses for say a parent, you might be able to deduct those expenses on your own tax return. Of course, they have to follow the same rules. They have to be over 7.5% of your adjustable gross income, but if you are footing the bill for some of your parents' medical expenses or long-term care expenses, definitely ask your tax advisor if you can deduct those expenses on your tax return.
One other important thing to note here, itemization is required. So, if you currently don't have enough itemized expenses to itemize and rather you take the standard deduction on your tax return, you can't do this.
Now, of course, your mortgage interest and possibly these medical expenses might increase your itemized deductions large enough to where you do take them as a deduction rather than the standard deduction. But it is important to note that you must itemize deductions in order to get any benefit from the medical expense deduction. All right, I hope this video is helpful.
