When filing taxes, you should take advantage of all possible deductions and tax credits to minimize your liability. An important deduction that many people tend to ignore is medical expenses.
First of all, it is important to understand what is included and what is excluded from the IRA’s definition of ‘medical expenses”. Anything that you pay for doctors or dentists qualifies as a medical expense. If you had to spend some time in a hospital or if you paid for medical equipment and prescription medication, then you can add these expenses too.
In fact, you can even add the money that you spent in traveling to a medical facility, including tolls and a 24 cents a mile travel allowance. However, you cannot include general health improvement expenses like what you pay for vitamins or a weight loss program, unless they have been prescribed by a doctor.
You can deduct any medical expenses that exceed 7.5% of your annual gross income when paying taxes. For example, if your annual gross income was $60,000 and you spent $5,000 on medical expenses last year, then you can deduct $500 from your taxable income.
This might not sound a lot, but it would be a significant amount if your annual gross income was lower last year because of unemployment. For example, if your income last year fell to $20,000, then from the same $5,000 medical expense, you will be able to deduct $3,500.
You should also know that you can combine the medical expenses of your spouse when claiming a deduction. But for that you would have to make a joint filing. This might not be a good idea if one of you had a low annual gross income and would have been able to claim a higher deduction if you filed separately. However, you should remember that if you file separately, you would lose out on other tax credits that are available for spouses.
You can also deduct the medical expenses of your dependents. Even if the person is not fully dependent on you, a claim is still valid if you paid more than half of the support cost for that person.
If you are not sure which of your expenses are eligible for deduction then you can refer to the IRS website, which contains detailed information about this rule. You can also take help from a good tax adviser to answer your queries.