Itemized Deductions

Some individuals should itemize their deductions because it will save them money. Others should itemize because they do not qualify for the standard deduction. See the discussion under Standard Deduction, earlier, to decide if it would be to your advantage to itemize deductions.

Medical and dental expenses, some taxes, certain interest expenses, charitable contributions, certain losses, and other miscellaneous expenses may be itemized as deductions on Schedule A (Form 1040).

You may be subject to a limit on some of your itemized deductions if your adjusted gross income (AGI) is more than $128,950 ($64,475 if you file married filing separately).

You may benefit from itemizing your deductions on Schedule A of Form 1040 if you:

• Cannot take the standard deduction,
• Had uninsured medical or dental expenses that are more than 7.5% of your adjusted gross income (see Medical and Dental Expenses later),
• Paid interest and taxes on your home,
• Had large unreimbursed employee business expenses or other miscellaneous deductions,
• Had large uninsured casualty or theft losses,
• Made large contributions to qualified charities (see Publication 526, Charitable Contributions), or
• Have total itemized deductions that are more than the highest standard deduction you can claim.

See the instructions for Schedule A in the Form 1040 instructions for more information.

Medical and Dental Expenses

You can deduct certain medical and dental expenses you paid for yourself, your spouse, and your dependents, if you itemize your deductions on Schedule A (Form 1040).

Table 5 shows items that you can or cannot include in figuring your medical expense deduction. More information can be found in Publication 502, Medical and Dental Expenses.

You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income shown on line 34, Form 1040.

What to include. You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. If you use a "pay-by-phone" or "on-line" account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. You can include medical expenses you charge to your credit card in the year the charge is made. It does not matter when you actually pay the amount charged.

Medical Insurance Premiums

You can include in medical expenses insurance premiums you pay for policies that cover medical care. Policies can provide payment for:

• Hospitalization, surgical fees, X-rays, etc.,
• Prescription drugs,
• Replacement of lost or damaged contact lenses,
• Qualified long-term care, or
• Membership in an association that gives cooperative or so-called "free-choice" medical service, or group hospitalization and clinical care.

You cannot deduct insurance premiums paid with pretax dollars because the premiums are not included in box 1 of your Form W-2.

If you have a policy that provides more than one kind of payment, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. The cost of the medical portion must be separately stated in the insurance contract or given to you in a separate statement.

Medicare A. If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. The payroll tax paid for Medicare A is not a medical expense. If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. In this situation the premiums paid for Medicare A can be included as a medical expense.

Table 5. Medical and Dental Expenses Checklist

Medicare B. Medicare B is a supplemental medical insurance. Premiums you pay for Medicare B are a medical expense. If you applied for it at age 65 or after you became disabled, you can deduct the monthly premiums you paid. If you were over age 65 or disabled when you first enrolled, check the information you received from the Social Security Administration to find out your premium.

Medical savings account. You may be able to make deductible contributions to a medical savings account (MSA) if you are an employee of a small business (fewer than 50 employees), or if you are self-employed and covered only by a high deductible health plan. See Publication 969, Medical Savings Accounts (MSAs), for more information.

Prepaid insurance premiums. Insurance premiums you pay before you are age 65 for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are:

1. Payable in equal yearly installments, or more often, and
2. Payable for at least 10 years, or until you reach 65 (but not for less than 5 years).

Medical and Dental Expenses

You can include in medical expenses the following medical and dental expenses.

• Medicines and drugs that are prescribed, and insulin. Do not include the cost of nutritional supplements, vitamins, herbal supplements, "natural medicines," etc., unless you can only obtain them legally with a physician's prescription.
• Medical services by physicians, surgeons, specialists, or any other medical practitioner. Amounts you pay for laser eye surgery (to promote the correct function of the eye), fertility enhancement procedures, or the cost of a vasectomy are also medical expenses. See Publication 502.
• Hospital services, therapy and nursing services (including part of the cost of all nurses' meals you pay for), ambulance hire, and laboratory, surgical, diagnostic, dental, and X-ray fees.
• Qualified long-term care insurance and services. See Publication 502.
• Life-care fee or a founder's fee paid either monthly or as a lump sum under an agreement with a retirement home. The part of the payment you include is the amount properly allocable to medical care. The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care.
• Wages and other amounts you pay for nursing services. Services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient.

  Only the amount spent for nursing services is a medical expense. If the attendant also provides personal and household services, these amounts must be divided between the time spent in performing household and personal services and time spent for nursing services. However, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. See Publication 503, Child and Dependent Care Expenses.

• Social Security tax, FUTA, and Medicare tax, and state employment taxes for a worker who provided medical care. For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide.
• Treatment at a therapeutic center for drug or alcohol addiction, including meals and lodging provided by the center during treatment.

Meals and Lodging

You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason for being there is to receive medical care.

You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. You can include the cost of such lodging while away from home if you meet all of the following requirements.

1. The lodging is primarily for, and essential to, medical care.
2. The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital.
3. The lodging is not lavish or extravagant under the circumstances.
4. There is no significant element of personal pleasure, recreation, or vacation in the travel away from home.

The amount you include in medical expenses cannot be more than $50 per night for each person. You can include lodging for a person traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night is included as a medical expense for lodging. (Meals are not included.)

Nursing home. You can include in medical expenses the cost of medical care in a nursing home or a home for the aged for yourself, your spouse, or your dependents. This includes the cost of meals and lodging in the home if the main reason for being there is to get medical care.

Do not include the cost of meals and lodging if the reason for being in the home is personal. You can, however, include in medical expenses the part of the cost that is for medical or nursing care.

Medical trip. You cannot deduct the cost of your meals and lodging while you are away from home for medical treatment if you do not receive the treatment at a medical facility or if the lodging is not primarily for or essential to the medical care.

Special Items and Equipment

Include in medical expenses the following payments.

• False teeth, artificial limbs, contact lenses, eyeglasses, hearing aids and batteries to operate it, and crutches.
• The cost and care of a guide dog or other animal to be used by a visually or hearing-impaired person. You can also include the cost and care of a dog or other animal trained to assist persons with other physical disabilities. Amounts you pay for the care of these specially trained animals are also medical expenses.
• The cost and repair of special telephone equipment that lets a hearing-impaired person communicate over a regular telephone.
• The extra cost of a specially equipped television set and the cost of an adapter for a regular set that provides subtitles for a hearing-impaired person.
• The part of the cost of braille books and magazines for use by a visually impaired person that is more than the price for regular printed editions.
• A plan that keeps your medical information so that it can be retrieved from a computer data bank for your medical care.
• Oxygen and oxygen equipment to relieve breathing problems caused by a medical condition.
• Amounts you pay for a program to stop smoking. If you paid for a stop-smoking program in 1997 or 1998, you may be able to file an amended return on Form 1040X to include in medical expenses the amounts you paid for that stop-smoking program. However, you cannot include in medical expenses amounts you pay for drugs that do not require a prescription, such as nicotine gum or patches that are designed to help stop smoking.
• Legal fees you paid that are necessary to authorize treatment for mental illness. You cannot include in medical expenses fees for the management of a guardianship estate, fees for conducting the affairs of the person being treated, or other fees that are not necessary to the medical care.
• Special hand controls and other special equipment installed in a car for the use of a person with a disability. Include the amount by which the cost of a car specially designed to hold a wheelchair is more than the cost of a regular car.
• An autoette or a wheelchair used mainly for the relief of sickness or disability, and not just to provide transportation to and from work. The cost of operating and keeping up an autoette or wheelchair is also a medical expense.

Do not include the cost of operating a specially equipped car, except as discussed next.

Transportation

Amounts paid for transportation primarily for, and essential to, medical care qualify as medical expenses.

You can include:

• Bus, taxi, train, or plane fares or ambulance service,
• Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and
• Actual car expenses, such as gas, oil, parking fees, and tolls. Instead of deducting actual car expenses, you can deduct 10 cents a mile for use of your car for medical reasons. Add the cost of parking fees and tolls to this amount.

  You cannot include depreciation, insurance, or general repair and maintenance expenses on your car, no matter which method you choose to figure the deduction.

Do not include transportation expenses if, for nonmedical reasons, you choose to travel to another city, such as a resort area, for an operation or other medical care prescribed by your doctor.

Home Improvements

Only reasonable costs to accommodate a personal residence to a disabled condition are considered medical care. Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. Publication 502 contains additional information and examples, including a capital expense work chart, to assist you in figuring the amount of the capital expense that you can include in your medical expenses. Also, see Publication 502 for information about deductible operating and upkeep expenses related to such capital expense items, and for information about improvement, for medical reasons, to property rented by a person with disabilities.

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