Medical expenses can really add up over the course of a year. The good news is that you may be eligible for tax deductions on those expenses not covered by your health insurance plan. The IRS allows tax filers to deduct unreimbursed, qualifying expenses for preventative care, treatment, surgeries, vision, and dental care. Unreimbursed expenses for mental health care, prescription medicines, and medical appliances such as eyewear, contact lenses, false teeth, and hearing aids can also be deducted.
What’s the medical expense deduction?
Your income level determines the deduction value for medical expenses. In 2020, taxpayers were allowed to deduct their total qualified unreimbursed medical expenses in excess of 7.5 percent of their adjusted gross income (AGI). Your taxable income less any adjustments to income equals your AGI. This means that on 2021 tax returns, taxpayers can deduct expenses in excess of 7.5 percent of their AGI for 2020.
Australian citizens enjoy the best public health system. Public patients pay zero out-of-pocket costs for GP visits, filling prescriptions at pharmacies, or visits to specialists. The Australian government funds Medicare by charging both a Medicare Levy and Medicare Levy Surcharge. Most Australians pay a two percent Medicare Levy, while only those Australians with a certain income level pay the Medical Levy Surcharge. At iSelect, you can learn who pays this surcharge and how to avoid paying it.
The Medicare surcharge is a tax paid if you lack private patient coverage or earn a certain annual taxable income. Australian singles earning more than $90,000 annually and joint tax filers with a combined income of more than $180,000 may be subject to the Medicare Levy Surcharge. This can be avoided if you have a sufficient level of private hospital cover.
The surcharge ranges from 1 to 1.5 percent of your taxable income. The federal government implements this surcharge as an incentive for higher-income earners to purchase private health insurance and ease the strain on the public health system. For every day you don’t have private health insurance within a financial year, you’re subject to paying a surcharge.
What medical expenses are tax-deductible?
There are several qualified, unreimbursed medical expenses that you can deduct on your tax return. Payments to general practitioners, dentists, surgeons, mental health care professionals, and other health care practitioners are deductible. Addiction programs, weight-loss programs, and hospital and nursing home care are all deductible. Insulin, pharmaceuticals, dentures, prescription eyewear, hearing aids, crutches, wheelchairs, and service animals qualify for tax exemption. Insurance premiums for medical care or long-term care insurance can be deducted provided they aren’t paid by your employer and you have out-of-pocket costs after taxes.
COVID-19 treatment should be covered by health insurance companies, Medicare, or Medicaid and these expenses are tax-deductible. Most private health insurance companies will cover COVID-19 treatment costs, which include deductibles and copayments.
How is the medical expense tax deduction claimed?
You’ll need to itemize your deductions to claim the medical expense deduction. This itemization needs to be done according to Schedule A which helps calculate your deduction. Your tax preparation software can help you with this. Depending on your financial situation and the complexity of your tax return, it’s a good idea to work with a tax professional this coming tax season. An accountant can help you maximize your tax return so you can keep more money in your pocket.
The best way to project a professional image as an accountant is to present completed documents in high-quality tax return folders. Mines Press carries a varied collection of tax folders including personalized foil-stamped and printed tax return folders. They also offer non-personalized folders perfect for placing business cards inside the sleeve. All folders come in a variety of stock, styles, and colors, and they’re compatible with tax preparation software programs.
You can deduct medical expenses from your tax return so long as you meet the eligibility requirements. Only those medical expenses that are qualified and unreimbursed may be itemized for a deduction.
