Medical and Dental Expenses
Important Changes
Standard mileage rate.
The standard mileage rate allowed for out-of-pocket expenses for your car when you use your car for medical reasons is now 13 cents a mile. See
Transportation under What Expenses Are Deductible.
Self-employed health insurance deduction rate increase.
For 2002, the rate increased from 60% to 70%.
Obesity as a disease.
The cost of participation in a weight-loss program as a treatment for the disease of obesity is an amount paid for medical care. However, the cost
of purchasing reduced-calorie diet foods is not a medical expense if these foods substitute for food you would normally consume to satisfy your
nutritional requirements.
New health insurance credit.
There is a new credit for health insurance premiums paid by certain workers who are displaced by foreign trade or who are receiving a pension from
the Pension Benefit Guarantee Corporation. For more information, see Health Insurance Credit in chapter 38.
Introduction
This chapter will help you determine:
- The definition of medical care,
- What expenses you can include this year,
- How much of the expenses you can deduct,
- Whose medical expenses you can include,
- What medical expenses are deductible,
- How you treat reimbursements, and
- How to report the deduction on your tax return.
Useful Items You may want to see:
Publication
- 502
Medical and Dental Expenses
Form (and Instructions)
- Schedule A (Form 1040)
Itemized Deductions
What Is the Definition of Medical Care?
Medical care means amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any part or
function of the body. The medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness.
Medical care expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for
transportation to get medical care. Medical care expenses also include limited amounts paid for any qualified long-term care insurance contract.
What Expenses Can You Include This Year?
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.
When do you include a decedent's medical expenses?
Medical expenses for a decedent that are paid from his or her estate are treated as paid at the time the medical services were provided if they are
paid within the 1-year period beginning with the day after the date of death. See Decedent under Whose Medical Expenses Can You
Include, later, for an exception.
Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final
income tax return. This includes expenses for the decedent's spouse and dependents as well as for the decedent.
How Much of the Expenses Can You Deduct?
You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income (line 35, Form
1040).
In this chapter, the term 7.5% limit is used to refer to 7.5% of your adjusted gross income. The phrase subject to the 7.5% limit is
also used. This phrase means that you must subtract 7.5% (.075) of your adjusted gross income from your medical expenses to figure your medical
expense deduction.
Example.
Your adjusted gross income is $20,000, 7.5% of which is $1,500. You paid medical expenses of $800. You cannot deduct any of your medical expenses
because they are not more than 7.5% of your adjusted gross income.
Separate returns.
If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each
actually paid. Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have
been paid equally by each of you, unless you can show otherwise.
Community property states.
If you and your spouse live in a community property state and file separate returns, any medical expenses paid out of community funds are divided
equally. Each of you should include half the expenses. If medical expenses are paid out of the separate funds of one spouse, only the spouse who paid
the medical expenses can include them. If you live in a community property state, are married, and file a separate return, see Publication 555,
Community Property.
Whose Medical Expenses Can You Include?
You can include medical expenses you pay for yourself and for the individuals discussed in this section.
Spouse.
You can include medical expenses you paid for your spouse. To claim these expenses, you must have been married either at the time your spouse
received the medical services or at the time you paid the medical expenses.
Example 1.
Mary received medical treatment before she married Bill. Bill paid for the treatment after they married. Bill can include these expenses in
figuring his medical expense deduction even if Bill and Mary file separate returns.
If Mary had paid the expenses before she and Bill married, Bill could not include Mary's expenses in his separate return. Mary would include the
amounts she paid during the year in her separate return. If they filed a joint return, the medical expenses both paid during the year would be used to
figure their medical expense deduction.
Example 2.
This year, John paid medical expenses for his wife Louise, who died last year. John married Belle this year and they file a joint return. Because
John was married to Louise when she incurred the medical expenses, he can include those expenses in figuring his medical deduction for this year.
Dependent.
You can include medical expenses you paid for your dependent. To claim these expenses, the person must have been your dependent either at the time
the medical services were provided or at the time you paid the expenses. A person generally qualifies as your dependent for purposes of the medical
expense deduction if:
- That person lived with you for the entire year as a member of your household or is related to you,
- That person was a U.S. citizen or resident, or a resident of Canada or Mexico, for some part of the calendar year in which your tax year
began, and
- You provided over half of that person's total support for the calendar year.
You can include the medical expenses of any person who is your dependent even if you cannot claim an exemption for him or her on your return.
Example.
In 2001 your son was your dependent. In 2002 he no longer qualified as your dependent. However, you paid $800 in 2002 for medical expenses your son
incurred in 2001 when he was your dependent. You can include the $800 in figuring your medical expense deduction for 2002. You cannot include this
amount on your 2001 tax return.
Adopted child.
You can include medical expenses that you paid for a child before adoption, if the child qualified as your dependent when the medical services were
provided or when the expenses were paid. If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with
you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of
the child. But if you pay back medical expenses incurred and paid before adoption negotiations began, you cannot include them as medical expenses.
You may be able to take a credit or exclusion for other expenses related to adoption. See Publication 968, Tax Benefits for Adoption,
for more information.
Child of divorced or separated parents.
If either parent can claim a child as a dependent under the rules for divorced or separated parents, each parent can include the medical expenses
he or she pays for the child even if an exemption for the child is claimed by the other parent.
Support claimed under a multiple support agreement.
A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than
half. If you are considered to have provided more than half of a person's support under such an agreement, you can include medical expenses you pay
for that person, even if you cannot claim the person as a dependent.
Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. However, you can include the
entire unreimbursed amount you paid for medical expenses.
Example.
You and your three brothers each provide one-fourth of your mother's total support. Under a multiple support agreement, you claim your mother as a
dependent. You paid all of her medical expenses. Your brothers repaid you for three-fourths of these expenses. In figuring your medical expense
deduction, you can include only one-fourth of your mother's medical expenses. Your brothers cannot include any part of the expenses. However, if you
and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the amount you paid
for her medical expenses in your medical expenses.
Decedent
The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical
care as paid by the decedent at the time the medical services were provided. The expenses must be paid within the 1-year period beginning with the day
after the date of death. If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form
1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return.
Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Medicare+Choice MSA
or Archer MSA.
Amended returns and claims for refund are discussed in chapter 1.
What if you pay medical expenses of a deceased spouse or dependent?
If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether
they are paid before or after the decedent's death. The expenses can be included if the person was your spouse or dependent either at the time the
medical services were provided or at the time you paid the expenses.
