Medical Expense Deductions

Jan 5, 2017 | By: Julie Geer

Medical expenses and deductions:

While most taxpayers have medical expenses throughout the year, not all are deductible on your federal tax returns. The first two rules of thumb to consider are:

• expenses must exceed 10% of Adjusted Gross Income (AGI)
• expenses must be paid by the taxpayer

Medical expenses are only deductible to the extent that they exceed 10% of your AGI. For example, if your AGI is $100,000 and you incur $14,000 worth of qualifying medical expenses this tax year, you can deduct $4,000 of those expenses. Since $14,000 is 14% of your AGI, only the $4000 or the 4% that exceeds 10% is deductible. [$14,000 - ($100,000*10%)] or [$Expenses – (AGI*10%)]. If you are unsure of your AGI, you can use last year’s as a reference point or call our office for assistance.

 Expenses also must be for you, your spouse, or a qualified dependent. You cannot claim expenses that your insurance covered or someone else paid for on your behalf.

Qualifying Expenses

As for what expenses qualify for the deduction, it may be more inclusive than you thought! Qualifying expenses include doctor’s visits, prescriptions, x-rays, and health insurance premiums as well as:

• treatment for alcohol addiction
• capital improvements on your home for which the main purpose is medical for you, your spouse, or your dependent
• contact lenses and solution
• dental treatment, preventative and alleviating
• meals and lodging for trips whose primary purpose is for medical care

Expenses That Don’t Qualify

There are also many expenses that may be beneficial for your health, but do not qualify for the medical expense deduction including:

• controlled substances that are illegal on a federal level (i.e. cannabis is legal in Oregon, but still illegal on the federal level)
• cosmetic surgery
• weight-loss programs are potentially deductible, depending on primary purpose (treatment of disease vs. general well-being)
• dancing lessons for general improvement of health
• maternity clothes

To see a complete list of qualified and unqualified expenses click here.

Oregon State Returns

As for the Oregon medical expense subtraction, you must be 64 years of age or older by the end of the 2016 tax year to claim expenses. The allowable subtraction amount decreases as your AGI increases. For more detailed information regarding the Oregon subtraction of medical expenses, click here:

While not every medical expense you incur is deductible, the ones that are can help reduce your tax liability.

Call Johnson Glaze today if you need help or have questions regarding the medical expense deduction. 503-390-7880