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 cost of gas used to transport a senior 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.
Claiming a Senior as Your Dependent
“There are a number of requirements that a caregiver must meet to deduct medical expenses for themselves and the person they care for,” explains Mark Luscombe, JD, LLM, CPA, 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.
In certain situations, you can deduct medical expenses you paid for an individual that would have been your dependent except that:
- He or she received gross income of $4,200 or more in 2019;
- He or she filed a joint return for 2019; or
- You, or your spouse if filing jointly, could be claimed as a dependent on someone else’s 2019 return.
How Much Can I Deduct?
“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 2019 Cost of Care Survey, 44 hours of in-home care per week costs an average of $4,290 per month. The average cost of an assisted living facility is $4,051 per month, and a semi-private room in a nursing home is $7,513 per month. Most caregivers can easily reach their deduction threshold if they are helping an aging parent pay for long-term care.
“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 the year. If your unreimbursed medical expenses exceed your standard tax deduction, you’ll want to deduct those expenses on your tax return by claiming an itemized deduction on Schedule A of Form 1040. The standard deduction for tax year 2019 is $24,400 for those married filing jointly, $12,200 for single taxpayers and married individuals filing separately, and $18,350 for heads of households.
Examples of Deductible Medical Expenses
- 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 for someone with diabetes)
- Eye surgery
- Hearing aids
- In-home health care (does NOT include custodial care services)
- Insurance premiums, co-pays and deductibles for health insurance, dental and eye insurance, and long-term care insurance (including Medicare Part B and Part D premiums)
- 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)
- 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
- Therapy received as medical treatment
- Transplants of organs
- Transportation by taxi, bus, train, ambulance, personal car, etc. to receive medical care
- Weight-loss programs (if part of treatment for a specific disease or condition, such as obesity)
Sources: Genworth Cost of Care Survey 2019 (https://www.genworth.com/aging-and-you/finances/cost-of-care.html); IRS provides tax inflation adjustments for tax year 2019 (https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2019)