As we get ready to prepare our tax returns for 2010 itís good to review what qualifies as a medical expense.
You can deduct any expenses for yourself, your spouse and your dependents. Generally, qualifying expenses are those paid for the diagnosis, cure, mitigation, treatment or prevention of a disease, or treatment affecting any structure or function of the body. Drugs are deductible only if they require a prescription. A complete list of what expenses qualify and donít qualify is available in IRS Publication 502. Since this publication is easily accessible on line, itís a good idea to look at the list and make sure you deduct only what is allowed.
Transportation is deductible if it is essential to medical care. That includes buses, cabs, trains or other transportation to and from medical appointments. If you use your own car you can deduct the standard mileage rate for medical expenses (16.5 cents in 2010, 19 cents in 2011), or the actual out-of-pocket expenses of gas and oil, tolls and parking.
Any expenses you deduct must be offset by any reimbursements you receive, even if those reimbursements are paid directly to a doctor or hospital.
Only medical expenses exceeding 7.5% of your adjusted gross income will actually be deducted. This is calculated on Schedule A. If you find that your expenses donít exceed this threshold, consider opening a Health Savings Account (if your health plan qualifies) or using your companyís Flexible Spending Account so that you use pre-tax money for these expenses.
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