APRIL 15 IS COMING QUICK AND IF YOU’RE THINKING ABOUT DEDUCTING MEDICAL AND DENTAL EXPENSES, you better get to work, gathering the documentation you’ll need to calculate how much you’ll be entitled to claim on your 2012 1040 federal return.
Qualified medical and dental expenses include payments to dentists, doctors, hospitals, insurance premiums (including premiums paid for Medicare advantage and some long-term care policies), medical equipment and supplies, and prescriptions. For a comprehensive list of IRS-approved medical and dental expenses, you can go to IRS.Gov and find IRS Publication 502.
While itemized deductions add up to big bucks on a national scale, medical itemized deductions may not add up to much on your return because you can only deduct out-of-pocket medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI). If, for example, your adjusted gross income for 2012 was $60,000.00 and you spent $4,000.00 in out-of-pocket medical and dental expenses, you would be able to deduct only $500.00.
The larger question for you might be whether or not you should itemize any deductions as opposed to taking the standard deduction and that is a question that is always best answered by a tax professional.
The seven critical facts you need to know about medical and dental deductions for the 2012 tax year come directly from the IRS website and read as follows:
“If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction.
- You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.
- Deduction is limited. You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income. (The 7.5% threshold increases to 10% beginning with the 2013 tax returns).
- Expenses paid in 2012. You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.
- Qualifying expenses. You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.
- Costs to include. You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.
- Travel is included. You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.
- No double benefit. Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.”
Helpful Hint: Before itemizing all of your medical receipts, multiple your prior year’s AGI (the last line on page one of Form 1040) by 7.5%. For example, if your last year’s AGI or expected AGI for the current year is $50,000, you would need over $3,750 of unreimbursed medical expenses to claim a tax deduction. If you had $4,000 of such medical expenses, you would be allowed to deduct $250 as an itemized deduction.
Note: Because each person and each business has unique needs and because tax laws are subject to change without notice, we invite you to call 610-594-2601 to make an appointment to consult with a tax professional before making any final decisions about deducting medical expenses.
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