Deducting Medicare expenses helps you get the most out of your tax return

Healthcare can be expensive. Luckily, if you have Medicare, there are several ways to reduce your costs.

Certain Medicare costs qualify as tax deductions. Claiming these medical expenses on your tax return can lower your taxable income (i.e., reduce your taxes).

Let's dive deeper into the types of Medicare expenses that qualify for tax deductions and discuss how to claim them on your tax return.

Are Medicare Expenses Tax Deductible?

Yes. You can deduct your Medicare expenses from your tax returns if you meet the eligibility requirements.

If you claim the standard deduction, check the current amount before filing your tax return. (Standard deductions change periodically).

Here's a list of standard deductions for 2022 and 2023:

Standard Deductions for 2022 & 2023

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Note: To maximize your tax benefits, you might want to itemize your deductions rather than claim the standard deduction. However, this is possible only when the total of your itemized deductions, including charitable donations, medical expenses, and state and local taxes, is higher than your standard deduction.

How Much Can I Deduct From My Taxes?

‎The amount of tax-deductible Medicare expenses depends on your:

• Adjusted Gross Income (AGI)

• Medicare expenses

In order to qualify for a tax deduction, your Medicare expenses must exceed 7.5% of your AGI (adjusted gross income). You can only claim a deduction for costs above this threshold.

• For example, you have $5,000 in medical expenses, and your AGI is $40,000. You can claim a deduction for any amount over $3,000 (i.e., 7.5% of $40,000)

  • $40,000 x 7.5% = $3,000

  • $5,000 - $3,000 = $2,000

What Medicare Expenses Are Tax Deductible?

You can claim a tax deduction for medical expenses you paid for yourself, your spouse, or a qualifying dependent.

Here are some examples of tax-deductible Medicare expenses:

• Medicare Part A premium

  • Most people are not required to pay the Medicare Part A premium because they or their spouse have paid Medicare taxes while working. However, if you're required to pay the Part A premium and are not yet collecting Social Security benefits, you may be able to claim a tax deduction for these premiums

• Medicare Part B premium

• Medicare Part D premium

• Medicare Advantage (Part C) premium

• Medigap premium

• Long-term care insurance premium

  • You may be able to deduct a portion of your long-term care insurance premiums on your taxes based on your age. The amount varies depending on age and ranges from $450 for those 40 or younger to $5,640 for those 71 or older

• Co-pays, deductibles and coinsurance for Part A, B or D services

In addition, you can also deduct taxes for the following medical expenses:

• Acupuncture

• Ambulance services

• Annual Physical Examination

• Cars

  • Vehicle modification costs for a disabled driver

  • Costs incurred to modify a car for wheelchair users, including interior and exterior changes

  • Transportation costs for medical appointments, such as the cost of gas and oil

• Dental services

• Eye exams & eyeglasses

• Crutches

• Chiropractic services

• Home Improvements

• Weight-loss programs

• Wheelchairs

• X-ray services

What Medical Expenses Are Not Tax Deductible?

Some medical costs don't qualify for tax deductions. Examples of non-tax-deductible expenses include the following.

• Nonprescription Drugs

  • Except for insulin, nonprescription drugs (e.g., over-the-counter medications and nutritional supplements) generally don't qualify for tax deductions

• Cosmetic surgery

• Late enrollment penalties

• Electrolysis, or hair removal

• Babysitting or childcare

• Funeral expenses

• Health Club Dues

• Hair transplants

• Personal use items (toothbrushes, floss, toilet paper, etc.)

• Teeth whitening

• Weight loss program

• Veterinary fees

How Do I Deduct Medical Expenses From My Taxes?

1. Keep Track of Your Medicare Expenses

Keep track of all your out-of-pocket costs, including receipts, bills, and statements from your healthcare provider. You will need to provide this documentation if you are audited by the Internal Revenue Service (IRS).

2. Calculate Your Deduction

Calculate your total out-of-pocket costs. Then, compare them to the applicable threshold (7.5% of your AGI).

3. Itemize if You Are Eligible

Itemize your deductions on your tax return using Form 1040, Schedule A.

4. Claim the Deduction on Your Tax Return

Complete the appropriate tax form and enter the total amount of your deduction. Attach any supporting documentation to your tax return. File your tax return by the deadline.

Takeaway

Tax deductions can help offset Medicare expenses, lower your taxable income, and potentially increase your tax refunds. Some qualifying Medicare expenses include premiums, out-of-pocket costs, and more.

To claim your tax deductions, follow these steps:

• Keep track of your Medicare expenses

• Calculate your deduction

• Itemize if you're eligible

• Claim the deduction on your tax return

If you're not sure about your deduction eligiblity or have questions about the process, give us a call at 1-888-376-2028. At Fair Square Medicare, we'll help you identify tax-deductible expenses that will bring you financial relief.