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Copayments to doctors can be expensive, but you may be able to write off a doctor’s copay on your taxes. The Internal Revenue Service allows you to deduct out-of-pocket medical expenses under some circumstances. If not, you might be able to use pre-tax dollars for unreimbursed medical expenses if you do a little advance preparation.
Deducting Medical Expenses
The IRS only allows you to write off a medical expense such as a doctor’s copay if it is part of unreimbursed health care costs in excess of 7.5 percent of your adjusted gross income. Suppose your AGI is $120,000 and you have $13,500 in unreimbursed medical costs. You have to subtract 7.5 percent of your AGI, or $9,000, from the $13,500. The remaining $4,500 can be written off on your taxes. The exclusion percentage increases from 7.5 percent to 10 percent on Jan. 1, 2013.
In addition to doctor’s copayments, you may include health insurance premiums and health maintenance plan fees as part of your unreimbursed medical expenses. Copays for acupuncture, visits to a chiropractor or your dentist may be counted, along with medical tests your doctor orders that you must pay for. You can also deduct the cost of prescriptions or equipment such as eyeglasses, bandages and crutches. Hospital costs, including physician’s fees, are deductible.
You cannot write off a doctor’s copay if you are reimbursed for it by your health coverage provider or by an employer-provided plan. You also cannot count payments made with funds from a pre-tax account such as a health savings account. Over-the-counter medications and medical supplies are not deductible unless they are prescribed by your doctor.
Use Pre-Tax Money
The purpose of writing off doctor copays is to save on taxes by using pre-tax dollars to cover these expenses. You can accomplish this purpose without having to satisfy the IRS rule that requires you to exclude 7.5 percent of your AGI. To do this, open a health savings account with a bank or other financial institution, either on your own or through your employer. You must have a high-deductible health coverage plan. You can contribute tax-deductible money up to the amount of your deductible or the IRS annual limit, whichever is less. Money from the HSA that is withdrawn and used to pay qualified medical expenses such as doctor's copays is not taxable.