With the substantial limits placed on medical expense tax deductions, many Americans find it impossible to deduct any of their medical expenses. To take the deduction, a taxpayer must have expenses totaling more than 10 percent of his adjusted gross income on his 1040 tax form. If you are like most, this is difficult to do, unless you take a closer look at some of the ways to make the most of your medical expenses.
One way that you can maximize the medical expense tax deduction is to take full advantage of timing and use a credit card to pay the deductibles and other out of pocket expenses. Make appointments for yourself and your family during the month of December for checkups, dental work or other procedures you might need including braces, chiropractic work, dentures, and vision checkups or obtaining glasses.
The Internal Revenue Service (IRS) allows you to count all your medical expenses, includingall the aforementioned items when claiming the deduction. The reason you should pay with a credit card is that the IRS considers those payments made during the year in which you make the payment, and not when you pay off the credit card. For example, if you pay off the card in January of 2015, the IRS rules dictate that the medical expenses were paid in December 2014.
If you don’t want to make a lot of visits to clinics, or doctor or dental offices, open a health savings plan, if you have one available. These plans offer a “temporary” tax-free haven for your medical expenses. Your employer takes an amount of money that you choose out of your paycheck, before taxing your income, and designates it to go to one of these plans.
The benefit of health saving plans is that the money is there when you need it for whatever medical expense emergency might come up. Because it comes out of a paycheck before taxes, many consider this to be “tax-free.” This could be an effective way to work around the 10 percent rule. However, some accounts limit the amount of money that employees can stow away. Additionally, some may have fine print that point to tax penalties under certain withdrawal situations.
Senior citizens often don’t have as much difficulty meeting the high percentage requirements when it comes to their medical expenses. At 7.5 percent, some seniors meet this level easily. However, some still don’t come close to meeting the threshold. These percentage levels, and the difficulty in meeting them, have some analysts believing that the tax code, at least for the medical expenses rule, needs a complete overhaul to something a little more taxpayer-friendly.
It's unclear what the future holds for income tax deductions, including those for medical expenses. With so many changes happening on a yearly basis, many hope that the deduction for medical expenses becomes a little more lucrative and not so difficult to manage.
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