Are Health Insurance Premiums and Medical Bills Tax Deductible?

You can generally deduct from your taxable income large unreimbursed expenses you incurred for medical and dental care. But you must absorb smaller unreimbursed medical and dental costs yourself. The medical or dental expenses must have been paid from your own pocket during the current year. Expenses paid by your health insurance policy can’t be deducted. As of 2012, there’s also an income-based medical cost exclusion that affects your medical deduction.

Medical Coverage

You can claim a tax deduction for medical and dental expenses you pay out-of-pocket for yourself, your spouse and your dependents. Medical bills paid by or for a decedent prior to death also are deductible. You can deduct the costs of medical and dental insurance premiums you pay out of your own pocket for policies that cover hospital care, services of medical practitioners and dentists, prescription drugs, medical supplies, contact lens replacement and long-term nursing care.

Medicare

You can deduct the premiums you pay for Medicare Part B medical practitioner coverage and Part D prescription drug coverage. You can’t deduct the Social Security Medicare tax that pays for Medicare Part A hospitalization coverage. However, if you were a government, religious or other employee who was exempt from the Social Security system and who voluntarily enrolled in Medicare Part A, then you can deduct your Part A premium as a medical insurance expense.

Deductible Expenses

You can deduct your out-of-pocket expenses for medical and dental procedures intended to prevent, diagnose or treat a medical or dental condition, disease or disorder. Deductible expenses also include costs of service animals for blind, deaf or disabled persons, mental health services, dentures, eyeglasses, hearing aids, wheelchairs and other durable medical equipment. You also can deduct costs of ambulance service, mileage for driving to medical appointments and up to $50 a night for meals and lodging if you must stay in town overnight to receive medical treatments.

Taking Deduction

To claim medical expenses you must itemize your deductions on Form 1040, Schedule A. Figure your medical expense deduction on Lines 1 through 3 of Schedule A, and take your deductible medical expenses on Line 4 of Schedule A. As of 2012, you can deduct only the medical expenses that exceed 7.5 percent of your adjusted gross income. For example, if your adjusted gross income was $75,000 and you had $6,500 in unreimbursed medical expenses, multiply $75,000 by 0.075 to get a medical cost exclusion of $5,625. You subtract the exclusion amount from your medical expense amount to get a deduction of $875. Starting in 2013, the exclusion percentage will rise to 10 percent of adjusted gross income.