How does a tax deduction work

how does a tax deduction work

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Tax Rules

Despite the uncertainty and confusion commonly associated with medical tax deductions, it is possible to get the government to pay for some of your medical bills--provided that you follow some tax rules. Your family must meet a deduction limit allowed by the Internal Revenue Service (IRS). Although medical costs are always rising and tax laws are subject to change, your medical costs must currently exceed 7.5 percent of your adjusted gross income in order to qualify for a medical deduction. The good news is that you are able to reach this deduction limit by adding the medical expenses of other family members and dependents to your taxes. One way of adding up medical expenses for nondependents is by summing up any costs you've paid for your parents' medical needs. An example to consider is prescriptions that your parents or grandparents cannot afford for themselves. As long as you paid for the medical care, prescription medicine or surgery, you get to write that off as a deduction on your taxes.

Hospital and Travel Deductions

Getting a deduction for a deceased relative is possible, even if you paid the expense after the relative passed away. All that is required is that the medical expenses were paid in the same year that you're writing off your medical tax deductions. Consider other expenses, such as travel costs. If you paid for an ambulance, then you will write off the expenses on your tax deduction. Driving someone to the hospital is tax deductible, so long as you record the miles you drove and the current mileage on your vehicle. As of 2008, medical deduction for travel was 19 cents per mile. To ensure proper deduction, check with a local tax-preparation business (such as H&R Block) or use a software package like Turbo Tax to walk you through the proper steps in deducting your medical expenses for travel. Deducting expenses for medical travel is just as stringent as deducting expenses for business travel. You must know your starting mileage and ending mileage, and maintain receipts for your travel expenses.

Medical Insurance and Long-Term Health Care

If you paid taxes on your insurance for medical treatment or long-term medical care, such as hospitalization or a psychiatric institution, then deduct it from your taxes. Remember to check with the IRS about age ranges for writing off medical-care insurance on your taxes. Popular tax preparation software, like Turbo Tax, may not include the update for age qualification for writing off medical insurance you've already paid taxes on.

Uninsured Medical Treatment

You don't have to be insured to write off a medical treatment. To write off uninsured items, sum up the expenses of miscellaneous medical treatments or items. These items include dental treatment (braces, false teeth, oral surgery), spectacles or contact lenses, artificial limbs and hearing aids. Some doctors offer relatively inexpensive treatment without the need of health insurance. A chiropractor, for example, may offer a one-time large fee (perhaps $200) for the first visit (usually including some X-rays and spinal heat measurements). Subsequent appointments with a chiropractor may only require a small fee ($20 or more). Keeping receipts will back up your claims in the event that you are audited by the IRS. Don't neglect to write off laser eye surgery or cosmetic makeup surgery. Any surgery treatments are taxable. Additionally, add up costs for items that are recommended by your doctor. For example, include things like humidifiers or air purifiers that are recommended by your doctor. As long as you keep the doctor's letter of recommendation, you'll be able to write off monthly billing expenses for the additional electricity used by the device. The amount of this deduction depends on the current tax laws.

Miscellaneous Write-Offs

Wheelchairs or crutches and phone devices for the hearing impaired are items worthy of medical deductions. Configuring an automobile for allowing ample space to fit a wheelchair is another item to add to your medical tax deduction. Service dogs for the blind or crippled count as a medical deduction. Write off any remodeling done to your home for permitting handicapped entryways, toilet and bathroom fixtures, and other accessories for the disabled.


Category: Taxes

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