Have you heard the saying “health is wealth?” No matter what position people take on healthcare reform, everyone can agree that large and unexpected hospital bills can be a serious drain on a family’s financial well-being. That’s why Congress enacted a deduction for the cost of medical care. It allows taxpayers to claim unreimbursed medical expenses on their tax returns.
The deduction applies not just to your own medical expenses but also to those of your family. Any parent knows that with glasses, braces and broken bones, the costs can add up quickly. So which expenses are deductible? Any bills you pay for the diagnosis, treatment or prevention of illness are covered. The range of eligible expenses is impressive, and it covers everything from Sudafed (Stock Quote: JNJ) to Seeing Eye dogs. You can also deduct the cost of your health insurance premiums. And we hope you didn’t take any ambulance rides this year, but if you did, their cost is included too.
Of course, some things simply aren’t deductible. Everyone wants to look fit and fantastic, but don’t expect to get the government to pay for your health club dues, Botox injections (Stock Quote: AGN) and elective cosmetic surgery. Medical marijuana isn’t deductible either. In addition, you cannot deduct expenses that were reimbursed by your insurance company, your employer, or your flexible health spending account.
Finally, the deduction comes with the usual Congressional math. It is only available for medical expenses that exceed 7.5% of your adjusted gross income. For example, if your income was $50,000 in 2008, you can claim any medical expenses in excess of $3,750, but your first $3,750 is not eligible for deduction. In other words, the deduction is only available if your income has been low or if you received a lot of medical care during the year.
The medical expense deduction is one that we hope you won’t have to claim in 2008 or ever. But it’s there if you need it. And don’t forget to check out our complete archive of Daily Deductions.