Trips to the doctor can add up quickly, especially if your insurance isn't footing the bill. The Internal Revenue Service grants a little relief with a federal income tax deduction for the costs you pay out of pocket. But, if you don't have a tax liability to begin with, the medical expenses deduction won't help you.
The medical expense deduction only helps to offset a tax bill. You can't get a tax refund on medical expenses if you don't owe any tax.
The Medical Expense Deduction
The medical expenses deduction allows you to write off your medical expenses that exceed 7.5 percent of your adjusted gross income. The expenses can be ones you pay for yourself, your spouse or your dependents, but not any costs that insurance covered or that you were reimbursed for through insurance. For example, if you pay $11,000 in medical expenses and your adjusted gross income is $90,000, you can only deduct $4,250.
As a deduction, your medical expenses only reduce your taxable income, rather than directly lowering your taxes or generating a refund. For purposes of calculating your tax liability, having a taxable income of $0 has the same result as a negative taxable income. So, if your income is already at $0, extra medical tax deductions can't further reduce your tax liability because your taxable income won't go down any lower.
Just because you're already receiving a tax refund doesn't mean that a medical expense's deduction won't increase the refund further. If you've had too much withheld from your paychecks during the year, you're entitled to a refund not because you don't owe any taxes, but because you've already paid more than you owe. If you tack on a medical expense deduction, you could further reduce your tax bill, increasing your refund. For example, say you had $8,000 withheld from your paycheck and you owe $7,000 in taxes. You're entitled to a $1,000 refund. If you tack on a medical expenses deduction that lowers your tax by $500, your refund goes up to $1,500.
Planning Your Deductions By Year
Your medical expenses are deductible in the year you pay them, not the year that you receive the medical services, which gives you a bit of control over when you get to take the deduction. For example, if you won't owe any taxes this year, but you anticipate owing the following year, you might be able to pay medical bills incurred toward the end of the year in January of the following year rather than in December. Alternatively, if you don't expect to owe any taxes the following year, consider prepaying medical expenses before the year ends so you can write them off in the current year when you have taxes to pay. To claim medical expenses, you'll need to fill out the first section of Schedule A and then list the total allowable deduction on 1040 line 8.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."