For many people, the cost of medical care keeps going up. So if possible, you should
find ways to claim tax breaks related to health care. Unfortunately, it can be difficult
because there's a threshold for deducting itemized medical expenses that can be
tough to meet.
To make matters worse, the threshold for senior taxpayers is going up beginning
January 1, 2017.
Before 2013, you could claim an itemized deduction for unreimbursed medical expenses
paid for you, your spouse and your dependents, to the extent those expenses exceeded
7.5% of your adjusted gross income (AGI). AGI includes all of your taxable income
items, reduced by certain write-offs, including those for deductible IRA contributions,
alimony payments and student loan interest.
As part of the Affordable Care Act, a higher deduction threshold of 10% of AGI
now applies to most taxpayers. However, if either you or your spouse were at least
65 as of December 31, 2016, the 10%-of-AGI deduction threshold won't affect you
for the 2016 tax year (the tax return you'll file in 2017). For 2016, the 7.5%-of-AGI
deduction threshold still applies for qualifying seniors.
However, this exemption is temporary. Beginning January 1, 2017, the 10% threshold
will apply to all taxpayers, including those over 65.
Consider "bunching" expenses in alternating years
If you aren't eligible for a deduction, you might be able to qualify if you concentrate
medical expenses in alternating years. That way, you may qualify to claim an itemized
medical expense deduction every other year - instead of losing the opportunity to
claim any deduction for health care costs. Of course, this might only work if you
have flexibility about when medical expenses are incurred.
Qualified medical expenses involve the costs of diagnosis, cure, mitigation, treatment,
or prevention of disease, and the costs for treatments affecting any part or function
of the body. This includes payments to physicians, dentists and other medical practitioners,
as well as equipment, supplies, diagnostic devices, prescription drugs and other
health care expenses.
Contact us if you have questions about what expenses are eligible and whether you
can qualify for a deduction.
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