Medical expenses deduction on taxes, is it worth it??

Question

This year we didn't have enough medical expenses to deduct on our taxes, but now that I know how much we actually need for it to "count" I'm thinking of using our tax return to pay off some of our medical/hospital bills to make it count for doing taxes next year....is it worth it though? I mean how much deduction do I get back from making the certain percentage to qualify??

Answer 1

In 1982, Congress mandated that 1% of your adjusted gross income be subtracted from your medical expenses, health insurance, etc. Then it jumped to 2%, then 7.5 %. It is a de facto banishment of the medical expense deduction. What you should do is start your own business [or have your husband commence one or launch a partnership].



If the taxpayer has a business, he is not subject to the 2% of AGI limitation. It's largely unknown, but it is "unused" . So, secondly, if a taxpayer has a business, he has a vast resource of potential deductions. The most affordable one, so long as he has the means to start a business and keep the business afloat, would be to switch his health insurance to the policyholder being the business name. Then the business owner pays the premiums out of his business.

It's called the Self-Employed Health Insurance Deduction. You cannot use the Form 1040A. You cannot deduct it on the Schedule C. There are a few restrictions. The business owner uses the 1040. It's Line 29. The self-employed health insurance deduction is not subject to the 7.5% AGI subtraction; 10% when figuring AMT liability. With the high and rising cost of

heath insurance, this is the only feasible way to pay the premiums. In 2004, the premiums became 100% deductible on the Schedule C. Only 10 or 12 years ago, the premiums were only 40% deductible. This is the only way to be able to afford family health insurance in America, but the deduction is unused, because it is being overlooked.



The medical expenses paid out of your business account are not subject to alternative minimum tax. When figuring medical expenses for the alternative minimum on the Schedule "A", it is 10%, not 7.5%.

Answer 2

Also, check your state income tax return. Some states -- like Ohio, for instance -- let you deduct medical expenses. In Ohio, it's still subject to the 7.5% AGI but, it doesn't have to exceed a standard deduction amount (like the federal form does).

Answer 3

Pay the bill to get it paid. Don't even worry about the tax bill for 2008 yet.



(Let's say you finally exceed 7.5% of your AGI for medical, then it gets added to the schedule A. Assuming you already itemize and are in the 15% tax bracket, the extra deduction will get you 15cents on the dollar back.)

Answer 4

Your total deductions must be greater than your "standard deduction. e.g Married filing jointly standard deduction is $10,700.00. If your deductables are greater than that then you can check to see if your medical expenses have any deductible value. e.g your total medical expense are $4879.00 - your adjusted gross income is $14572.00 and you take .075% of that which is $1106 which is deducted from your total medical expenses. That allows you to expempt $3773.00 as a medical deduction.

Answer 5

its not really a "deduction"... you can itemize them on your schedule A (provided your within the income threshold) in the long run resulting in raising the amount you can itemize over your standard deduction... which results in lowering your taxable income

Answer 6

I think that you should speak to an accountant about this to be on the safe side first. It probably would be worth it though.

Answer 7

Find a good tax accountant and talk to them about this.