Medical expenses are the costs of diagnosis, cure,
mitigation, treatment, or prevention of disease, and the costs for treatments
affecting any part or function of the body. Medical expenses include the costs
of equipment, supplies, and diagnostic devices needed for these purposes. The
expenses must be primarily to alleviate or prevent a physical or mental defect
or illness.
Limit on Itemized Deductions
For 2013, itemized deductions for medical expenses are
limited to the amount above 10% of the taxpayer’s adjusted gross income (7.5%
for taxpayers age 65 or over). Amounts below the percentage limit are not
deductible. For 2012 and earlier years, the limit was 7.5% of AGI for all
taxpayers.
When Medical Expenses Are Deductible
Medical expenses are deductible in the year actually paid,
regardless of when the services in the past were provided. Expenses paid by
check are considered paid on the date mailed or delivered.
Credit Card
Expenses paid by credit card are considered paid on the
date charged to the credit card, not the date the balance on the credit card is
paid.
Future Services
Payments for care to be provided substantially beyond the end of the year are
not deductible as medical expenses, except for lifetime care advance payments
and payments for long-term care insurance.
Whose Medical Expenses Are Deductible
Deductible expenses include those incurred by the taxpayer,
spouse, or dependent.
Spouse
The taxpayer must have been married to the spouse either at
the time the spouse received the medical services or at the time the taxpayer
paid the medical expenses.
Dependent
Medical expenses paid for a dependent
are deductible if the person was a dependent either at the time the services
were provided or at the time the expenses were paid. For medical expense
purposes, a dependent is any person for whom an exemption deduction is allowed,
plus anyone who cannot be claimed as a dependent because of one of the
following.
• The
person who paid the medical expenses was a dependent of another taxpayer,
• The
person for whom the medical expenses were paid filed a joint return,
• The
person for whom medical expenses were paid had gross income of $3,900 or more
during the year, or • The dependency exemption for a child of divorced or
separated parents was assigned to the non-paying parent.
Exception for an Adopted Child
Generally, a dependent must be a U.S. citizen or national
or a resident of the U.S., Canada, or Mexico. An adopted child that lived with
the taxpayer all year passes this test if the taxpayer is a U.S. citizen or
U.S. national.
Decedent’s Medical Expenses
Medical expenses paid before death by a decedent are
included on the decedent’s final return. This includes expenses for the
decedent’s spouse and dependents. A surviving spouse or personal representative
of a decedent can choose to treat medical expenses paid by the estate for the
medical care of the decedent as paid by the decedent at the time the medical
services were provided if the expenses are paid within one year of the day
after the date of death.
Medical expenses for a deceased spouse or deceased
dependent are deducted on the taxpayer’s return in the year paid, whether they
are paid before or after the decedent’s death. The expenses are deductible if
the decedent was the taxpayer’s spouse or dependent either at the time the
medical services were provided or at the time the expenses were paid.
Long-Term Care
Amounts paid for qualified long-term care expenses are
deductible as medical expenses. Qualified long-term care services are necessary
diagnostic, preventive, therapeutic, curing, treating, mitigating,
rehabilitative services, and maintenance and personal care services that are
required by an individual who is chronically ill, and are provided pursuant to
a plan of care prescribed by a licensed health care practitioner.
Medicines
The cost of prescribed medicines is deductible.
Nonprescription medicines, such as nicotine gum and patches, are not
deductible.
• Over-the-counter drugs. The cost of
drugs purchased without a prescription, such as antacid, allergy medicine, and
pain relievers, is not deductible as a medical expense. The cost of dietary
supplements, such as vitamins, that are merely beneficial to the general health
of the employee is not reimbursable on a pretax basis.
• Insulin exception. The cost of insulin
is deductible whether or not it is prescribed by a doctor.
• Imported drugs. Imported prescription
drugs can be deducted only if legally imported. The cost of prescribed drugs
purchased and consumed in another country are deductible only if the drug is
legal in both the other country and the United States.
Nursing Home
The cost of living in a nursing home, including meals and
lodging, is deductible if a principal reason for being there is to get medical
care. If the taxpayer is in a nursing home for personal reasons, only the part
of the cost that is for medical or nursing care is deductible.
Reimbursed Medical Expenses
Medical expenses that are reimbursed by insurance,
Medicare, Archer MSAs, health savings accounts (HSAs), or other sources are not
deductible. Reduce total medical expenses paid by total reimbursements received
during the year. Reimbursements for medical expenses are generally not included
in income, and the expense that is reimbursed is not deducted from income.
However, any medical expenses that exceed the reimbursements are deductible,
and any reimbursements that exceed medical expenses are taxable to the extent
the reimbursement was provided to the taxpayer on a pre-tax basis.