2020 May Be Your Last Chance For A Medical Expense Tax Deduction
Are medical expenses taking a bite out of your budget? This may be your last chance for deducting medical and dental expenses because the threshold for qualifying for deductions is set to revert to its higher level after 2020.
For 2020, the IRS allows all taxpayers to deduct the total qualified unreimbursed medical care expenses that exceeds 7.5% of their Adjusted Gross Income. Prior to that, ACA raised the bar to 10% of AGI (except for seniors). Subsequently, the Tax Cuts and Jobs Act returned the threshold to the 7.5% of AGI level for 2017 and 2018. Still with us? Extender legislation enacted by Congress late last year, called the Taxpayer Certainty and Disaster Tax Relief Act, restored the 7.5% of AGI limit for 2019 and 2020. And that’s where we stand now. There is no guarantee the threshold will not revert back to 10%, so try to take full advantage of the lower threshold for this year if you expect to itemize deductions. Make sure you count all the expenses that qualify for the deduction.
You can deduct payments for the diagnosis, cure, mitigation, treatment, or prevention of disease. You can also deduct payments for treatments affecting any structure or function of the body. Included are health insurance premiums and a portion of premiums paid for long-term care insurance (LTCI) policies based on the insured’s age. In addition:
- Fees for doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and other medical practitioners
- In-patient hospital care or nursing home services, including the cost of meals and lodging charged by the hospital or nursing home
- Acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction, for participation in a smoking-cessation program and for drugs to alleviate nicotine withdrawal if they require a prescription
- Expenses to participate in a weight-loss program for a specific disease or diseases, including obesity, diagnosed by a physician
- Insulin and prescription drugs
- Payments for false teeth, reading or prescription eyeglasses or contact lenses, hearing aids, crutches, wheelchairs, and for guide dogs for the blind or deaf
- Transportation needed to obtain necessary medical treatment such as fares for taxis, buses, trains and ambulances. If you use your own vehicle, you can deduct the portion of actual costs attributable to medical-based travel or use a standard rate. The standard rate, which is adjusted annually, is 17 cents per mile in 2020.
To claim the medical expenses deduction, you must itemize your deductions, which means you do not take the standard deduction. If your itemized deductions are greater than your standard deduction then it makes sense to claim the medical expenses deduction. If appropriate, you may want to schedule doctor and dentist visits before year end to clear the 7.5% of AGI threshold or boost an existing deduction. More details on eligible medical and dental expenses here: https://www.irs.gov/pub/irs-pdf/p502.pdf