Even with the help of health insurance, medical expenses cost a whole lot and they are only continuing to rise year after year. The good thing is that insurance premiums, co-pays and uncovered medical expenses are deductible as itemized deductions on your tax returns. Whether you are covered by your employer or by an individual coverage, there are some tips that you can use to make sure you are maximizing your deductions.
First, what used to be 7.5% rule is now going to be changed to the 10% rule starting in 2013. What this mean is that you can deduct medical costs not reimbursed by insurance or other plans only to the extent such costs exceed 10% (instead of 7.5%) of your adjusted gross income. However, those individuals who are age 65 and older can continue to use the 7.5% threshold through year 2016.
As described earlier, whenever you get a service or treatment, the money you pay out of pocket for that visit is deductible. This includes co-pays or what you have paid from your plan’s annual deductible. It is time to check your medical history and see if any of these services come up – doctor visits and examinations, dental visits, eye exams, lab fees, hospital care, and/or surgery.
Make sure you have an inventory or excel sheet of all your medications, so you know exactly what you are taking and how much you are paying for it throughout the year. However, during this step, keep in mind the medications that you should and should not include as part of the deductions. You can include – prescriptions, birth control pills, insulin, and over-the-counter drugs that the doctor has specifically prescribed to you. Items that you should not include are over-the-counter drugs that were not a prescription, vitamins or supplements, and any medications you acquired from another country.
An item that is often overlooked as a medical expense is the travel distance and costs to and from doctors offices. In 2010, the rule was to deduct 16.5 cents per mile. In 2011, this rate got bumped up to 19 cents per mile. If you took public transportaion, you can include the fare instead of the mileage. Airfare to another city for treatment or other medical services, including up to $50 per night for lodging, can also be included as a medical tax deductible.
Another change being made deals with the medical flexible spending arrangement (FSA). Your employer may let you put some of your wages to a FSA, meaning the money you put in there are not taxable to you. For example, if you make $50,000 but put $2,000 into an FSA, you will be taxed only on $48,000. For 2013, the contribution limit is set at $2,500.
Now you see why it is so important to do some research and understand all the information before taking the next step! Remeber to use the tips listed above when trying to maximize your medical expense tax deductions. And do not forget to keep in mind the changes that are occuring with these deductions in the coming years.
Every summer, Archana works at Kumon, a math and reading workshop, tutoring children between the ages of three and 18 in these subjects. She used to be enrolled in this program herself, so this allows her to connect with the students and give them the one-on-one help that they need. Archana is also currently a member of NC State’s Psychology Club, Rotaract Club, and EKTAA (NC State’s premiere South Asian Student Organization).
Archana was born in India, and moved to North Carolina with her immediate family when she was 7 years old. She speaks mostly Tamil, the native language of South India, and English in her home. In addition, having taken Spanish classes since 6th grade, she can speak and understand it pretty well too. Archana enjoys spending time with her family and friends, watching movies, listening to music, and going to the gym. She also loves to travel, and hopes to travel the world one day and learn about all the different cultures!
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