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Though the cost of braces might make you want to frown, you’ll put your new smile to good use if you can use the dentist bills as a tax deduction. Orthodontic work is a qualified medical expense, but unless your expenses exceed the threshold required by the government, it won’t do you any good on your taxes.
You can include orthodontic work that you pay for yourself, your spouse and your dependent children. For dependents' expenses to qualify, you must be able to claim them as a dependent either when the work is performed or when you pay for the services. For example, if your daughter that you claim as a dependent gets braces in 2012 and you pay for the entire cost that year, you can deduct it in full, even if you don’t claim her as a dependent in future years when the services are still being provided.
You claim the deduction for the orthodontic bills in the year that you pay for them, not the year that you receive the services. For example, if you prepay $3,000 for orthodontic work in November 2012 and the work starts in December and continues through 2014, you claim the entire deduction on your 2012 tax return. If, rather than paying for all the services in one year you pay for them over the three years in which the services are provided, you can write off the services on all three years' taxes, as long as you meet the threshold. It's possible to time the payments to maximize the tax benefits.
You can’t deduct your orthodontic bills until you have a total that exceeds the threshold based on your adjusted gross income. The threshold is 7.5 percent in 2012 and 10 percent in 2013. However, you can combine your orthodontic bills with other qualifying medical expenses to meet the threshold. For example, if in 2013 you have an adjusted gross income of $79,000, you can only deduct your expenses exceeding $7,900; if you have $5,000 in orthodontic bills and $4,000 in other medical expenses, you can deduct $1,100.
To report your deduction, itemize with Schedule A. Enter your total medical expenses, including your orthodontist bills, on line 1. Then copy your adjusted gross income from line 38 of your Form 1040 tax return to line 2 and figure your deduction threshold on line 3. Your final deduction goes on line 4. Once you've added all your itemized deductions, the total goes on line 29 of Schedule A and replaces your standard deduction on line 40 of Form 1040.
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