What Medical Expenses Are Deductible?

Use Table 23-1 in this chapter as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). See Publication 502 for information about other expenses you can include.

Table 23-1. Medical and Dental Expenses Checklist

You can include:	You can include:	You CANNOT include:	You CANNOT include:
Birth control pills prescribed by your doctor Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502) Cost of certain fertility enhancement procedures (see Publication 502) Cost and care of guide dogs or other animals aiding the blind, deaf, and disabled Cost of lead-based paint removal (see Publication 502) Cost of vasectomy Expenses of an organ donor Eye surgery - to promote the correct function of the eye Hospital services fees (lab work, therapy, nursing services, surgery, etc.) Legal abortion Legal operation to prevent having children Long-term care contracts, qualified (see Publication 502) Meals and lodging provided by a hospital during medical treatment Medical and hospital insurance premiums Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners)	Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Prescription medicines (prescribed by a doctor) and insulin Psychiatric care at a specially equipped medical center (includes meals and lodging) Social Security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc.) Special school or home for mentally or physically disabled persons (see Publication 502) Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services (see Publication 502)	Archer MSAs (see Publication 969) Bottled water Cost of nutritional supplements, vitamins, herbal supplements, natural medicines, etc., unless you can only obtain them legally with a physician's prescription Diaper service Expenses for your general health (even if following your doctor's advice) such as - - Health club dues - Household help (even if recommended by a doctor) - Social activities, such as dancing or swimming lessons - Trip for general health improvement	Funeral, burial, or cremation expenses Illegal operation or treatment Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Surgery for purely cosmetic reasons (see Publication 502) Toothpaste, toiletries, cosmetics, etc.

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,
• Membership in an association that gives cooperative or so-called free-choice medical service, or group hospitalization and clinical care, or
• Qualified long-term care insurance contracts (subject to additional limitations). See Qualified Long-term Care Insurance Contracts in Publication 502.

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 part must be separately stated in the insurance contract or given to you in a separate statement.

Employer-sponsored health insurance plan.   Do not include in your medical and dental expenses on Schedule A (Form 1040) any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. Also, do not include on Schedule A (Form 1040) any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2.

Example.   You are a federal employee participating in the Federal Employee Health Benefits (FEHB) program. Your share of the FEHB premium is paid with pre-tax dollars. Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money.

Flexible spending arrangement.   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. This amount will be reported as wages in box 1 of your Form W-2.

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 on your tax return.

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.

Prepaid insurance premiums.   Premiums you pay before you are age 65 for insurance 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 age 65 (but not for less than 5 years).

Unused sick leave used to pay premiums.   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. You must also include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. You can include this cost of continuing participation in the health plan as a medical expense.

If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. You cannot include this cost of continuing participation in that health plan as a medical expense.

Health Insurance Costs for Self-Employed Persons

If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, up to 70% of the amount paid for health insurance on behalf of yourself, your spouse, and dependents. If you itemize your deductions, include the remaining premiums with all other medical care expenses on Schedule A (Form 1040), subject to the 7.5% limit. See chapter 7 of Publication 535, Business Expenses, for more information.

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. See Nursing home, later.

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 for lodging cannot be more than $50 for each 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 can be 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 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.

Transportation

You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care.

You can include:  

• Bus, taxi, train, or plane fares, or ambulance service,
• Transportation expenses of a parent who must go with a child who needs medical care,
• 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
• Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment.

You cannot include:  

• Transportation expenses to and from work even if your condition requires an unusual means of transportation, or
• Transportation expenses if, for nonmedical reasons only, you choose to travel to another city, such as a resort area, for an operation or other medical care prescribed by your doctor.

Car expenses.   You can include out-of-pocket expenses for your car, such as gas and oil, when you use your car for medical reasons. You cannot include depreciation, insurance, general repair, or maintenance expenses.

If you do not want to use your actual expenses, you can use a standard rate of 13 cents a mile for use of your car for medical reasons.

You can also include the cost of parking fees and tolls. You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate.

Example.   Bill Jones drove 2,800 miles for medical reasons during the year. He spent $200 for gas, $5 for oil, and $50 for tolls and parking. He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction.

He figures the actual expenses first. He adds the $200 for gas, the $5 for oil, and the $50 for tolls and parking for a total of $255.

He then figures the standard mileage amount. He multiplies the 2,800 miles by 13 cents a mile for a total of $364. He then adds the $50 tolls and parking for a total of $414.

Bill includes the $414 of car expenses with his other medical expenses for the year because the $414 is more than the $255 he figured using actual expenses.

Disabled Dependent Care Expenses

Some disabled dependent care expenses may qualify as medical expenses or as work-related expenses for purposes of taking a credit for dependent care. (See chapter 33.) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction.

Impairment-Related Work Expenses (Business or Medical)

If you are disabled and have expenses which are necessary for you to be able to work (impairment-related work expenses), you can take a business deduction for these expenses, rather than a medical deduction. You are disabled if you have:

• A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or
• A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working.

You can deduct impairment-related expenses as business expenses if they are:

• Necessary for you to do your work satisfactorily,
• For goods or services not required or used, other than incidentally, in your personal activities, and
• Not specifically covered under other income tax laws.

Example.   You are blind. You must use a reader to do your work. You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. The reader's services are only for your work. You can deduct your expenses for the reader as business expenses.

How Do You Treat Reimbursements?

You can deduct as medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement.

Insurance Reimbursement

You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. This includes payments from Medicare.

Generally, you do not reduce medical expenses by payments you receive for:

• Permanent loss or use of a member or function of the body (loss of limb, sight, hearing, etc.) or disfigurement that is based on the nature of the injury without regard to the amount of time lost from work,
• Loss of earnings, or
• Damages for personal injury or sickness.

You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year.

Excess reimbursement.   If you are reimbursed more than your medical expenses, you may have to include the excess in income. You may want to use Figure 23-A to help you decide if any of your reimbursement will be taxable income.

Premiums paid by you.   If you pay the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance, you generally do not include an excess reimbursement in your gross income.

Premiums paid by you and your employer.   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of an excess reimbursement that is from your employer's contribution.

You can figure the percentage of the excess reimbursement you must include in gross income using the following formula.

Amount paid by employer Total annual cost of policy

=

Percent of excess reimbursement that is taxable

Example.   You are covered by your employer's medical insurance policy. The annual premium is $2,000. Your employer pays $600 of that amount and the balance of $1,400 is taken out of your wages. The part of any excess reimbursement you receive under the policy that is from your employer's contributions is figured as follows:

$600  $2,000

=

30%

You must include in your gross income 30% (.30) of any excess reimbursement you received for medical expenses under the policy.

Premiums paid by your employer.   If your employer or your former employer pays the total cost of your medical insurance plan and your employer's contributions are not included in your income, you must report all of your excess reimbursement as other income.

More than one policy.   If you are covered under more than one policy, the costs of which are paid by both you and your employer, you must first divide the medical expense among the policies to figure the excess reimbursement from each policy. Then divide the policy costs to figure the part of any excess reimbursement that is from your employer's contribution.

Example.   You are covered by your employer's health insurance policy. The annual premium is $1,200. Your employer pays $300, and the balance of $900 is deducted from your wages. You also paid the entire premium ($250) for a personal health insurance policy.

During the year, you paid medical expenses of $3,600. In the same year, you were reimbursed $2,400 under your employer's policy and $1,600 under your personal policy.

You figure the part of any excess reimbursement you receive that is from your employer's contribution as follows:

Step 1.
Reimbursement from employer's policy	$2,400
Reimbursement from your policy	1,600
Total reimbursement	$4,000
Amount of medical expenses from your policy [($1,600 ÷ $4,000) × $3,600 total medical expenses]	$1,440
Amount of medical expenses from your employer's policy [($2,400 ÷ $4,000) × $3,600 total medical expenses]	2,160
Total medical expenses	$3,600
Excess reimbursement from your employer's policy ($2,400 - $2,160)	$240
Step 2.
Because both you and your employer contributed to the cost of this policy, you must divide the cost to determine the excess reimbursement from your employer's contribution.
Employer's contribution in relation to the annual cost of the policy ($300 ÷ $1,200)	25%
Amount to report as other income on line 21, Form 1040 (25% × $240)	$60

Reimbursement in a later year.   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you must report the reimbursement as income up to the amount you previously deducted as medical expenses. However, do not report as income the reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 13.

Figure 23-A. Excess Medical Reimbursement Algorithm

Medical expenses not deducted.   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 7.5% of your adjusted gross income, or because you did not itemize deductions, do not include in income the reimbursement for this expense that you receive in a later year. However, if the reimbursement is more than the expense, see Excess reimbursement, earlier.

Example.   Last year, you had medical expenses of $500. You cannot deduct the $500 because it is less than 7.5% of your adjusted gross income. If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include that amount in your gross income.

Settlement of damage suit.   If you receive an amount in settlement of a personal injury suit, the part that is for medical expenses deducted in an earlier year is included in income in the later year if your medical deduction in the earlier year reduced your income tax in that year. See Reimbursement in a later year, earlier.

Future medical expenses.   If you receive an amount in settlement of a damage suit for personal injuries that is properly allocable or determined to be for future medical expenses, you must reduce any medical expenses for these injuries until the amount you received has been completely used.

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