The IRS provides short explanations to help taxpayers determine if an expense is eligible for payment. The recently published FAQs address the costs of nutritional counseling, weight-loss programs, gym memberships, and treatment for substance use disorders, among other things. Medical expenses may also be paid or reimbursed under a health savings account (HSA). Typically, deductions can be claimed for medical expenses incurred during the tax year, provided that certain requirements are met. In this article, we’ll explore these FAQs and offer guidance on when and how certain expenses may be eligible for deductions.
DEDUCTIBLE MEDICAL EXPENSES 2015 SERIES
This legislation is moving quickly, but the millions of families harmed by the elimination of the medical tax deduction need to pay attention.The IRS recently published a series of frequently asked questions (FAQs) to help clarify which nutrition, wellness, and general health expenses may be considered medical expenses. While the Senate’s version of the tax bill leaves this deduction untouched, it would repeal the Affordable Care Act’s individual mandate penalty, causing middle-class premiums to rise even higher.Ĭongressional leaders hope to hammer out the differences between the House and Senate bills soon, with the goal of getting it to the President’s desk by the end of the year. This tax bill comes on the heels of the Trump Administration’s decision to discontinue cost-sharing reduction payments to insurance companies, which will result in even higher premiums for middle-class families who are ineligible for premium tax credits. It is not hard to see how critical the medical expense tax deduction could be for a middle-class family that has a member with cancer or a chronic condition requiring a lot of medical attention. So, a family of four with income just above the threshold for premium tax credit eligibility, $97,000, could face up to $23,700 in medical expenses in a year.
In 2016, the average unsubsidized family paid just under $10,000 for premiums alone. In 2016, the federal government capped out-of-pocket payments for those purchasing private insurance through the marketplace at $13,700 for a family plan, and this is the maximum amount a family could be made to pay in addition to their premiums. The New York Times profiled a number of such Americans who rely on this deduction, including a 54-year old woman with breast cancer, a couple with a son who was born with spina bifida, and a couple undergoing in vitro fertilization. Eliminating this tax deduction would primarily affect middle-class families with high medical expenses. Further, while most other itemized deductions benefit those with incomes over $200,000, the medical expense deduction is mostly claimed by tax filers with incomes between $50,000 and $200,000. The contrast between the relatively low number of claimants and the high amount claimed in deductions indicates that this deduction is used by people who face steep out-of-pocket medical expenses. In 2015, 8.8 million people claimed a total of $87 billion in medical deductions on their tax returns. adults spend 10 percent or more of their income on medical expenses, not including premiums. Deductible “medical expenses” include health insurance premiums, fees paid to health care providers, payments made for prescription drugs, and payments for transportation essential to medical care.Īccording to a recent Commonwealth Fund survey, close to one-fifth of U.S. One of the most concerning provisions is the elimination of the medical expense deduction, which permits those who itemize their federal income tax deductions to deduct medical expenses that exceed 10% of their annual gross income. House Republicans passed their version of the tax reform bill on November 16 th.
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