August 18, 2020
August 18, 2020
Even after asking the right questions and lowering your out-of pocket-expenses, a medical bill for your last cancer treatment can still drain your finances. As your treatment and care continues, it is not uncommon to see medical bills adding up and eventually becoming a financial burden. Luckily for taxpayers, there is some relief available in the form of tax deductions.
According to the Internal Revenue Service (IRS), some of your medical expenses related to the cost of cancer are tax deductible. But for this to happen, you need to know what is considered a medical expense and what steps you need to take to claim your deductions properly.
Knowing what is considered a medical expense is the first step to understanding if you can claim medical expenses on your taxes. According to tax laws, a medical expense is considered the cost of a diagnosis, cure, mitigation, treatment or prevention of a disease. It includes the costs associated with health insurance premiums that are not deducted pre tax from your paycheque, doctor appointments, hospital stays, diagnostic testing, prescription drugs and medical equipment.
Here is an overview of what the IRS allows you to deduct from your taxes:
Dental and vision care
Visits to psychologists and psychiatrists
Prescription medications and appliances such as glasses, contacts, false teeth and hearing aids
expenses to travel or transportation for medical care (i.e. bus fare, parking fees)
Wigs for cancer patients
Fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners
Payments for inpatient hospital care or residential nursing home care
Payments for insurance premiums
For a full list of medical expenses that qualify as tax deductible, consider consulting a tax advisor, the IRS website, or a Healthcare Advisor.
Knowing what is not tax deductible is just as important as knowing what is tax deductible. The IRS does not allow you to deduct the following from your taxes:
Any medical expenses for which you are reimbursed by your insurance or employer
Non-prescription drugs or medicine
Funeral or burial expenses
Employer-sponsored premiums paid under a premium conversion plan, cafeteria plan, or any other medical and dental expenses paid by the plan
As of 2020, you are able to deduct qualified medical expenses that exceed 10% of your adjusted gross income. For example, if you have an adjusted gross income of $50 000, only expenses exceeding $5,000 (10%) can be deducted from your taxes.
If your medical expenses for the year end up being below $5,000 and you have an adjusted gross income of $50,000, then you will not be able to claim medical expenses on your taxes.
However, if your medical expenses end up being $8,000 at the end of year, and you have an adjusted gross income of $50,000, then $3,000 could be deducted from your taxes.
To be able to claim your medical expenses, you have to itemize your deductions. So instead of taking the standard deduction, you will have to pick and choose your tax deductions. Itemized deductions are the expenses that can decrease your taxable income. Claim the medical expenses deduction only if your itemized deductions are greater than the standard deductions. Itemizing your deductions will require you to use IRS Form 1040 to file your taxes and attach Schedule A.
Remember: only include medical expenses that you paid during the year and exclude the expenses that were reimbursed.