If health-care expenses have been squeezing your household budget, it could be worth checking if they'd get you a tax break on your 2018 return.
A range of medical expenses can qualify, and as long as you itemize instead of taking the standard deduction, a portion of those costs can help lower your tax bill.
While the Tax Cuts and Jobs Act of 2017 eliminated most deductions, the one for medical expenses remains in place, along with those for charitable contributions and mortgage interest. Taxpayers also can still take a deduction for state and local taxes (a.k.a., SALT) although it is now capped at $10,000.
However, there are a couple of hurdles to clear before you can grab the tax break for medical expenses.
First, as mentioned, you must itemize your deductions. And for itemizing to make financial sense, the combination of all your available deductions would need to exceed the standard deduction, which nearly doubled as of 2018. For single taxpayers, it's $12,000; head-of-household, $18,000; and married couples filing jointly, $24,000. (Taxpayers age 65 and older get an additional $1,300.)
Second, you can only deduct qualifying medical expenses that exceed 7.5 percent of your 2018 adjusted gross income (total income minus certain adjustments). For example, if your AGI was $50,000, only medical expenses that exceed $3,750 would qualify.
"So far we're seeing more single people than married couples taking the medical expense deduction," said Bryan Bibbo, an advisor with The JL Smith Group in Avon, Ohio.
For example, he said, a single taxpayer with other write-offs — mortgage interest, charitable contributions and SALT — could find that the medical expense deduction more easily pushes them over that $12,000 standard deduction. For married couples filing jointly, the $24,000 hurdle is more difficult.
"They might have double the medical expenses, but not as much in other deductions," Bibbo said.
Retiree health costs
As for what counts toward the tax break, qualifying expenses run the gamut.
Co-pays, co-insurance, dental work, travel costs associated with health care (getting to and from the doctor's office, for example) are all fair game. So are hearing aids, crutches, wheelchairs and the like. You can check the IRS list of qualifying expenses if you're unsure whether something counts toward the deduction.
Also, if you pay for health insurance with after-tax dollars, your premiums might be able to count toward the deduction. Long-term care premiums also are deductible up to amounts that depend on your age (see chart below).