Many caregivers and their aging loved ones rack up thousands of dollars every year in medical expenses. This includes items and services not covered by Medicare, co-pays and deductibles, even the amount of gas used to get to and from doctor’s appointments.
Depending on the total amount you’ve spent over the past year, you might be able to deduct those medical expenses on your taxes. However, you must have an awful lot of medical expenses to take the deduction.
“There are a number of requirements that a caregiver must meet to deduct medical expenses for themselves and the person they care for,” says Mark Luscombe, CPA, JD, LLM, principal federal tax analyst at Wolters Kluwer Tax & Accounting. First and foremost, the person receiving care must meet certain support, income, relationship, citizenship and other tests to be claimed as a dependent by their caregiver. (You can read more about whether you can claim a loved as a dependent here.)
“Secondly, the medical expenses must be of the type approved by the IRS as qualifying for the medical expense deduction,” Luscombe says. To qualify for the deduction, the total cost of your eligible unreimbursed medical expenses must exceed 7.5 percent of your adjusted gross income (AGI). For example, if your AGI is $50,000, then the first $3,750 of medical expenses don’t count. If you incurred $4,750 in medical expenses last year, then you would only be able to deduct $1,000 ($4,750 - $3,750).
This may seem like a high threshold but consider the average costs of long-term care in this country. According to Genworth’s annual Cost of Care Survey, 44 hours of home health care per week costs an average of $4,099 per month. The average monthly cost of an assisted living facility is $3,750 per month, and a semi-private room in a nursing home is $7,148 per month. Most caregivers can easily reach their deduction threshold.
“If all these requirements are met, a caregiver can get significant tax benefits from writing off their own medical expenses, those of their spouse, if applicable, and those incurred on behalf of the person they care for,” says Luscombe.
So, take the time to add up the amount of medical expenses you pay out of pocket during year. If it is enough, you can deduct those expenses on your tax return by claiming an itemized deduction on Schedule A of Form 1040.
Here is an abbreviated list of medical expenses that are tax deductible:
- Adapters to TV sets and telephones for hearing impaired individuals
- Braille books and magazines
- Capital improvements to your home to accommodate a disability
- Car (the cost of special equipment so a disabled person can drive)
- Chiropractic services
- Contact lenses plus wetting and cleaning solutions
- Dental care
- Diagnostic devices (such as a blood sugar test kit)
- Eye surgery
- Hearing aids
- In-home health care (NOT custodial care)
- Insurance premiums, co-pays and deductibles for health insurance, dental and eye insurance, and long-term care insurance
- Laboratory fees
- Lifetime care fees (a percentage of fees paid under a lifetime contract with a continuing care retirement community)
- Long-term care services prescribed by a licensed health care practitioner for a chronically ill individual
- Meals (while staying in a hospital or similar facility)
- Medicare Part B and Part D premiums
- Nursing home and assisted living costs
- Optometrist services
- Oxygen therapy and related equipment
- Prescription drugs and medicine (drugs from foreign pharmacies are not deductible)
- Psychiatric care
- Service animals
- Stop-smoking programs
- Transplants of organs
- Transportation to receive medical care by taxi, bus, train, ambulance, personal car, etc.
- Weight-loss programs (if part of treatment for specific disease or condition, such as obesity)
A complete list of deductible medical expenses is available in IRS Publication 502: Medical and Dental Expenses.