By Daniel Petkevich
Dec 28, 2022
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.
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
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.
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
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
Home Improvements
Weight-loss programs
Wheelchairs
X-ray services
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
Late enrollment penalties
Electrolysis, or hair removal
Babysitting or childcare
Health Club Dues
Hair transplants
Personal use items (toothbrushes, floss, toilet paper, etc.)
Teeth whitening
Weight loss program
Veterinary fees
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).
Calculate your total out-of-pocket costs. Then, compare them to the applicable threshold (7.5% of your AGI).
Itemize your deductions on your tax return using Form 1040, Schedule A.
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.
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.
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