Medical Expense Deduction Changes

New rules may prevent deductions on your return

New rules may affect the deduction for medical expenses on your Schedule A, Itemized Deductions. Medical expenses are subject to an adjusted gross income (AGI) limitation. The new rules raise the threshold that unreimbursed medical and dental expenses you paid for yourself, your spouse, and your dependents must reach before a deduction is permitted.

For each medical expense, you should keep a record of:

  • The name and address of each medical care provider you paid, and
  • The amount and date of each payment.

You should also keep a statement or itemized invoice showing the following:

  • A description of the medical care received,
  • Who received the care, and
  • The nature and purpose of the medical expenses.

These items are not submitted with your tax return, but records that you should keep in your personal file.

Most people who itemize their deductions can claim deductions for unreimbursed medical expenses (those which are not covered by health insurance). The amount of medical expenses you could deduct prior to 2013 was the unreimbursed expense that exceeded 7.5% of your AGI. This percentage increased to 10% for most taxpayers in 2013.

If you’re under age 65 at year end, the floor on deducting medical expenses increases to 10%. However, if you or your spouse are age 65 or older, the 7.5% floor continues to apply until 2016. If you’re under age 65 in 2013, but reach age 65 before 2016, you’d be subject to the 10% floor in 2013 and any other year before age 65, and then revert to the 7.5% floor in the year you turn age 65.

After 2016, all taxpayers, regardless of age, are subject to the 10% floor.