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If you have huge medical bills, deducting them from your taxes may give your bank account some welcome relief. Tax laws let you write off lots of medical expenses, including doctor visits, hospital stays, prescription drugs, acupuncture and mileage driving to medical appointments. If your insurance or some sort of charity fund-raiser pays the bills, your deduction shrinks.
The AGI Rule
You never get to deduct all your medical bills. As of 2013, you first add up all your qualifying expenses, then subtract 10 percent of your adjusted gross income. If you have $23,000 in hospital bills and an AGI of $113,000, you subtract $11,300 from your bills. That leaves you with $11,700 as a write-off. If your total expenses are less than 10 percent of your AGI, you have no deduction.
If you get reimbursed for any of your expenses, you deduct that from your total expenses and only claim what remains. You can't claim any deduction if the reimbursement puts your expenses under 10 percent of your AGI. A charity fund-raiser reduces your medical deduction, whether it reimburses you for your spending or pays your bills directly. Funds raised to make up for other losses and not to pay medical bills -- for example, funds raised to make up for your lost wages -- don't affect your deduction.
Fund-raisers for your medical bills affect the people who give you money as well. If someone gives to a charity that helps with medical costs and some of that money finds its way to you, the donor can claim a charitable write-off. Money contributed to a fund-raiser specifically to pay for your bills, however, isn't deductible. The federal charitable-deduction rules prohibit deducting donations earmarked for particular people. There's no deduction for them, whether you or your doctor receives the donation.
If you're almost over the 10 percent boundary, double-check that you've included every possible medical expense. For example, if your parent qualifies as your dependent according to IRS rules, you can include his medical bills, too -- if you pay them -- along with your other family members' bills. Go over the medical-expense list in IRS Publication 502 and look for expenses you haven't thought of. Potential write-offs include breast pumps, Braille books and birth control pills, for instance.
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