No one loves to discuss taxes, and we certainly don’t love paying them! But since taxes are a fact of life, planning for them can at least reduce your burden to some degree. Once you enter retirement, every penny counts, so understanding your potential tax deductions is more important than ever.
The IRS allows for medical expense deductions, which become more helpful and meaningful to you in retirement. The list of allowable medical expenses (to claim the deduction) is quite lengthy, but includes the following a variety of costs related to the diagnoses and treatment of medical conditions. You can even deduct transportation expenses (to receive care) or the cost of necessary modifications to your home.
Of particular interest to retirees, some insurance premiums can be deducted on your federal income tax return. These include:
- Premiums for long-term care insurance
- Premiums for Medicare Part A, Part B, Part D, and private Medicare plans
- Deductibles and co-payments for Part A, B, or D services
- Out of pocket prescription drug costs
- Premiums for Medigap supplemental insurance
- Out of pocket costs for things that Medicare doesn’t cover, such as hearing aids, eyeglasses or contact lenses, dental treatments, and nursing homes
As you can see, the rules allow for a wide range of tax-deductible expenses related to medical care. However, that doesn’t mean you can deduct absolutely everything that might fall under this category. The following expenses are not deductible on your taxes:
- Late penalties added to your Medicare premiums
- Prescription drugs purchased overseas
- Vitamins and supplements (unless your doctor specifically recommends them to treat a condition)
- Premiums for group health insurance that are paid with pre-tax dollars
- Medical payments for which you were reimbursed by an insurer
Please Note: This article should serve as a guide to help you understand what might be deductible on your taxes, but should not be considered tax planning advice. Before claiming medical expense deductions on your taxes, we highly recommend that you consult with your tax professional to be sure they are allowed.