During a pandemic year, you might be especially concerned with the cost of healthcare and your out-of-pocket expenses. Luckily, certain provisions in the income tax code do allow you to claim a deduction for these expenses, according to certain limits. Read on to learn which of your expenses might be deductible on your 2020 tax return, and how these changes can benefit you.
Unreimbursed medical expenses. You are normally allowed to deduct any medical expenses not reimbursed by your healthcare plan, such as dental and vision care, mental health care, preventive care, and any other medical expenses that are not covered and therefore paid out of pocket. Glasses, contact lenses, hearing aids, and dentures can also be claimed. You can even deduct mileage when you must travel to receive healthcare, and other travel expenses such as parking fees, tolls, or bus fare.
If those expenses total more than 7.5 percent of your adjusted gross income, you will receive a deduction on your taxes. However, many people do not itemize deductions because their total deductions do not exceed the standard deduction. As you can see, the unreimbursed medical expenses deduction can be a bit complicated.
Covid-related medical expenses. Many healthcare plan administrators announced that they would be covering 100 percent of Covid-related care, regardless of each patient’s deductible. But if your plan wasn’t one of those, or if you experienced other medical expenses related to Covid treatment, you can claim these as a deduction on your tax return. Covid-related expenses are subject to the same rules listed above.
Some expenses are not deductible. While they appear to be healthcare-related, some unreimbursed medical expenses cannot be counted toward your tax deduction. These include, but are not limited to,
- Cosmetic surgery
- Nonprescription drugs (except insulin)
- Vitamins and other supplements
- Diet food
- Nonprescription nicotine products
Also, if you pay for medical expenses out of a flexible spending account or health savings account, you can’t claim those as a deduction because those accounts are already tax advantaged.
How to claim medical expenses on your taxes. If your unreimbursed medical expenses exceed 7.5 percent of your adjusted gross income, and your total deductions exceed your standard deduction, you will probably want to file an itemized return. Use IRS Form 1040 and attach Schedule A. Talk to your tax professional about these procedures if you have any more questions about this tax deduction, and to ensure that you’re calculating your deduction correctly.