Did you know a portion of your medical and dental expense are deductible on your tax return? That's right, if you itemize your deductions you can generally deduct qualifying health care costs that exceed 10% of your adjusted gross income (AGI). These expenses will be deductible on your Schedule A, to the extent you did not already claim them as part of your Self Employed Health Insurance deduction.
Chris is a 28-year-old rideshare driver who last year had an AGI of $25,000, paid $2,400 for health insurance premiums and also spent $3,000 on qualifying healthcare costs not reimbursed or paid for through his insurance policy. If Chris itemizes his deductions, he could deduct up to $500 ($3,000 qualifying medical costs - ($25,000 AGI x 10%)) of unreimbursed medical and dental costs on lines 1 through 4 of his Schedule A. Note that he would deduct the $2,400 of health insurance premiums he paid as part of the Self Employed Health Insurance deduction on line 29 of his Form 1040.
Erin is a 23 year old freelance photographer with no health insurance policy. Last year her AGI was $20,000 and she ended up spending $4,000 out of pocket at the hospital as a result of a snowboarding accident. When Erin prepares her taxes she would be able to deduct up to $2,000 ($4,000 qualifying medical costs - ($20,000 AGI x 10%)) of her medical expenses on her Schedule A if she itemizes her deductions. If she instead takes the standard deduction she will not be allowed to deduct any of her medical expenses.
Kelly is an employee for a large consulting firm who rents her home on Airbnb nearly every week while she travels for work. Last year Kelly had an AGI of $85,000 and incurred $2,000 of qualifying medical expenses. Unfortunately, Kelly would not be able to deduct any of her $2,000 of qualifying medical expenses because they do not exceed 10% of her AGI ($8,500).
Kayla is a professional speaker who just started her freelance career. Since last year was her first year in business, she barely broke even, earning $5,500 of net profit from her business. Last year she spent $7,300 on health insurance coverage for herself, her husband and their 3 year old daughter. Since her premiums exceed her business net profit, her Self Employed Health Insurance deduction will be limited to $5,500, however, she could deduct the $1,800 ($7,300 - $5,500) of health insurance premiums paid in excess of the Self-Employed Health Insurance deduction on her Schedule A if she itemizes her deductions and has an AGI of less than $18,000.
Pete is a delivery driver for Postmates who had an AGI of $43,000 in 2018. Last year, with money he had been saving, he spent $23,000 on hair transplants. Unfortunately, since the IRS considers hair transplants to be unnecessary cosmetic surgery, he would not be able to deduct any of the $18,700 ($23,000 medical costs - ($43,000 AGI x 10%)) of medical expenses in excess of 10% of his AGI.
