Don't miss little-known medical tax breaks that can save you money.
Money Girl
262 MG Deduction Dangers, Part 3: Medical and Dental Expenses
Building a portfolio with Fidelity Basket Profolios is kinda like making a sandwich. It's as simple as picking your stocks and ETFs, sort of like your meats and other topics. And managing it as one big juicy investment. That's pretty good. Learn more at Fidelity.com/baskets. Investing involves risks including risk of loss, Fidelity Broker Services LLC, member NYSC SIPC. Now at T-Mobile. Get four 5G phones on us and four lines for $25 a line per month when you switch with eligible trade-ins. All on America's largest 5G network. Minimum of four lines for $25 per line per month without a paid discount using debit or bank account. $5 more per line without auto pay plus taxes and fees and $10 device connection charge. Phones will be at 24 monthly bill credits for well qualified customers, contact us before canceling entire accounts and continue bill credits or credit stop and balance on a required finance agreement to bill credits and if you pay off devices early see T-Mobile.com. Hi friends, I'm Laura Adams and you're listening to the Money Girl Podcast. I want to thank iTunes for featuring this special three part series about tax deduction dangers and give a big welcome to new listeners who may have just discovered the show. In the first installment I told you about the mortgage interest deduction and some common mistakes that can trip up homeowners. In the second installment I told you how to deduct your job related expenses and a few exceptions and dangers to avoid. In this final installment we'll be talking about how your medical and dental expenses can lower your tax bill, which expenses are deductible and how to claim them. What may surprise you about the medical and dental tax deduction is the wide variety of expenses allowed by the IRS. I won't have time to cover every one of them in this podcast so I recommend that you take a look at the complete list of deductions which is in IRS publication 502 so you don't miss any money saving deductions that might apply to your situation. Before we get into specific expenses it's important to know that qualified medical expenses are defined as payments for the diagnosis, cure, mitigation, treatment or prevention of disease or treatments affecting any structure or function of the body. When you pay for medical and dental care for yourself, your spouse or your dependence you're entitled to deduct the amount that exceeds 7.5% of your adjusted gross income or AGI. Let's say you have AGI of $50,000 in 2012 and you spend $4,000 on qualified medical expenses. When you multiply 50,000 by 7.5%, you find that you'd need a minimum of $3,750 in total medical expenses to qualify for this deduction. So if you had 4,000 in medical expenses, you could deduct any amount over the threshold of 3,750, which would be just $250, not the full amount of 4,000. And by the way, starting in 2013, the threshold for the medical deduction will get bumped up from 7.5% to 10% of AGI, making it a little more difficult to take advantage of. To claim a tax deduction for medical expenses, you have to meet the following two conditions. Number one, you must file taxes on Form 1040 and itemized deductions on Schedule A. And two, you must have qualified medical expenses that were not reimbursed, no matter if you receive a reimbursement or if it's paid directly to a doctor or hospital. Some common tax-deductible medical expenses include fees paid to doctors, dentists, psychologists and psychiatrists, hospital or nursing home care, including the cost of meals and lodging, prescription drugs and insulin, eye exams, eyeglasses and contact lenses, including cleaning equipment and solution, hearing aids, crutches and wheelchairs, and transportation costs essential to receive medical care, including ambulance service. Besides these ordinary expenses, don't miss the non-traditional medical expenses, including acupuncture, fees paid to chiropractors, fees paid to a Christian scientist practitioner, treatment for alcohol or drug addiction, including meals and lodging, plus transportation to and from alcoholics anonymous meetings in your community. Fertility treatment, such as in vitro fertilization and pregnancy test kits, lactation supplies like breast pumps, sterilization procedures like vasectomy, home improvements, including modifications to bathrooms, doors, kitchen cabinets, entrances and stairs to accommodate a disability. The cost of removing lead-based paint from your home, owning a guide dog or other service animal, participation in a program to stop smoking, a weight loss program when recommended by a doctor to treat a medical condition, and special education for a child with learning disabilities when recommended by a doctor. As I mentioned, this is not a complete list of qualified medical expenses, so be sure to refer to IRS Publication 502, called medical and dental expenses for more information. You can also deduct insurance premiums that cover medical and dental care, unless your employer paid them for you. That's because the cost of employer-paid premiums are typically excluded from your gross income, making them a tax-free benefit to begin with. So, deducting them on Schedule A would be double-dipping, which is definitely not allowed by the IRS. Additionally, medical expenses paid using a health savings account don't qualify for a tax deduction because funds in the account were never subject to tax. While there are hundreds of expenses that qualify for the medical and dental tax deduction, don't get carried away. Nearly a billion people experienced hunger last year, and organizations on the front line need support. That's why at Global Citizen Festival, City announced a new commitment supporting World Food Programs Mission, and you can help. City will match donations to World Food Program up to $250,000 until December 1st or until we reach our goal, whichever comes first. Visit wfpusa.org/city to make a donation and double your impact. For the love of making a difference, for the love of progress, City. After investing billions to light up our network, T-Mobile is America's largest 5G network. Plus, right now, you can switch, keep your phone, and we'll pay it off up to $800. See how you can save on every plan versus Verizon and AT&T at tmobile.com/keepandswitch. Up to four lines via virtual prepaid card, a left 15 days qualifying unlocked device credit service ported 90+ days with device and eligible carrier and timely redemption required. Card has no cash access and expires in six months. I love learning, and anything that makes learning easier. If you're a parent and your child needs some homework help, then Ixcel is a right for your family. Ixcel is an online learning program for kids covering math, language arts, science, and social studies. Ixcel has interactive practice problems for topics from pre-K to 12th grade, and everything is organized by grade and subject. As kids practice, they get positive feedback, awards, and explanations for wrong answers. Ixcel figures out what your kids need more help with and recommends more topics to practice. Their videos, lessons, sample problems, and learning games too. One subscription to Ixcel gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder Ixcel is used in 95 of the top 100 school districts. I think the positive feedback that Ixcel gives is really crucial when it comes to learning. So make an impact on your child's learning. Get Ixcel now, and money girl listeners can get an exclusive 20% off Ixcel membership when they sign up today at Ixcel.com/moneygirl. Visit Ixcel.com/moneygirl to get the most effective learning program out there at the best price. Here's a list of expenses that are not tax deductible. Over-the-counter medicines that don't require a prescription. Controlled substances like marijuana, even if legalized by state law. Personal use items like toothpaste, tissues, or soap. Elective cosmetic surgery or hair transplants. Teeth whitening. Gym memberships or swimming lessons. Vitamins or nutritional supplements are less recommended by a doctor to treat a diagnosed medical condition. And funeral or burial expenses. You can deduct medical and dental expenses in the year you paid for them, regardless of when the services were provided. So if you received medical treatment in 2010, but didn't pay for it until 2011, you can only deduct the expenses in 2011. If you neglected to claim a deductible medical expense, you can file an amended tax return on Form 1040x for the year you missed the tax break. You generally have three years from the date the original return was filed, or two years from the date you paid tax, whichever is later, to correct a botched tax return. For links to everything mentioned in the podcast, always visit the MoneyGirl page at quickanddirtytips.com. Also, be sure to get the free MoneyGirl newsletter and connect with me on social media for even more money tips. You can do a search for MoneyGirl in Facebook and follow me on Twitter where my username is @LaraAdams. To learn more about taxes and smart ways to manage your money, get a copy of my award-winning book MoneyGirl's Smart Moves to Grow Rich. It tells you what you need to know about money without bogging you down with what you don't. It's available at your favorite bookstore in print or as an e-book. You can even download two free book chapters when you visit smartmovestogrowrich.com. I'm glad you're listening to Ching. That's all for now, courtesy of MoneyGirl, your guide to a richer life. H5N1 bird flu is spreading in some animals. If you work with poultry, dairy cows, wild animals, or with raw, unpasteurized milk, wear protective gear and take precautions. ctc.gov/birdflu, a message from CDC. Hey, it's Laura Coats, host of the Laura Coats Show on SiriusXM POTUS. When we go beyond the soundbite, we break down everything. Politics and the law and pop culture, it's what you care most about. Listen to the Laura Coats Show at home or anywhere you are, no car required. Download the SiriusXM app for over 425 channels of ad-free music, sports, entertainment, and more. Subscribe now and get three months free. Offer details apply. [ Silence ]