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Taking a Healthy Medical Deduction in 2018.


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5/28/2018
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Taking a Healthy Medical Deduction in 2018.

Previously, you could deduct medical expenses in excess of 10% of adjusted gross income (AGI) for 2017. Under the new law, the threshold for 2018 is now only 7.5% of AGI. Putting that into perspective, for someone with income of $100,000 of annual income, which is reduced by an $11,000 contribution to an IRA, leaving $89,000 of taxable income – then medical expenses must be above $6,675 before the deduction kicks-in.

The list of qualified expenses goes much further than doctor and dental visits and major surgeries or in-office procedures. Here are several examples of qualified expenses that are often missed.

  • Prescription drugs (including insulin or statins) are treated as deductible medical expenses, but not over-the-counter medications.  Don’t forget the costs of psychiatrists, psychologists, chiropractors, or podiatrists. This is a really big one as the use of prescription drugs by Americans reaches all-time highs.  It would be good if Advil, Tylenol and other cold meds also were treated as deductible items.
  • If a family member needs nursing services at home, the cost of the services is deductible. The medical care doesn’t have to be provided by a registered nurse. This is a big one… home health care is on the rise and is a major issue for a lot of Americans, especially children caring for their ailing parents or those recuperating from a surgery or other invasive treatment.
  • If you make a home improvement for a medical reason (e.g., installing central air conditioning to alleviate asthma), you can deduct the cost to the extent it exceeds the increase in the home’s value (if any). This is also becoming more and more important… as quality of life becomes an increasingly popular reason to make an investment in your long-term health.
  • The cost of travel to receive medical care or treatment, including airfare, is deductible even if similar care or treatment is available nearby. If you go by car, you can deduct your actual expenses or a flat rate of 18 cents per mile if you drive (plus related tolls and parking fees). Ok… so unless it’s a major surgery that isn’t going to do much…
  • You can deduct lodging at a hotel or motel while you are receiving medical care or treatment away from home. The limit is to $50 per night per person. If a companion’s presence on the trip is required, his or her cost is also deductible, subject to the $50 limit. Again… not going to change your life… but still good to know.

Some things you may have missed, but should be aware of that qualify:

  • Premiums for long-term care insurance.  Where does this come from?  The U.S. congress introduced “tax qualified” long-term care insurance (“LTCI”) plans with the 1996 passage of the Health Insurance Portability and Accountability Act (“HIPAA”).  Why is this important?  How does it work?  It’s complicated!  Couple of things… you can pay this out of an HSA.

For 2018, the LTCI premium deduction caps are:

  • $420 for age 40 or below;
  • $780 for ages 41 through 50;
  • $1,560 for ages 51 through 60;
  • $4,160 for ages 61 through 69; and
  • $5,200 for insured’s over 70.


Category: Tax Law


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