If you have medical expenses you pay yourself, you may deduct them as an itemized personal deduction to the extent they exceed 10% of your adjusted gross income (AGI). For many years the threshold was 7.5% but that was increased to 10% in 2013, except for people over 65 whose rate remains at the 7.5% level until 2017. Your AGI is your total taxable income, minus deductions for retirement contributions and one-half of your self-employment taxes, if any, plus a few other items (as shown at the bottom of your Form 1040).
One way to best take advantage of this deduction is to bunch as many uninsured expenses as you can into a single year, so that your total medical expenses are as high as possible for that year. For example, if you need to have expensive dental treatment, do it in a single year so you can add it to your total health expenses for the year.
However, not all health related expenses are deductible. Nondeductible health expenses include:
- nonprescription drugs
- advance payment for services to be rendered next year
- athletic club membership
- bottled water
- child care for a healthy child--you cannot deduct amounts you pay for the care of children, even if the expenses enable you, your spouse, or your dependent to get medical or dental treatment; also, any expense allowed as a childcare credit cannot be treated as an expense paid for medical care
- commuting expenses of a disabled person
- cosmetic surgery and procedures that are not medically necesssary--for example, hair transplants, face lifts, hair removal, liposuction, teeth whitening; however, you can deduct medical expenses for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease
- cosmetics, hygiene products, and similar personal items
- diaper service
- domestic help
- flexible spending account--you cannot include in medical expenses amounts for which you are fully reimbursed by your flexible spending account if you contribute a part of your income on a pre-tax basis to pay for the qualified benefit
- funeral, cremation, or burial expenses
- health programs offered by resort hotels, health clubs, and gyms
- illegal operations and treatments
- health club dues
- illegally procured drugs, this includes medical marijuana
- maternity clothes
- medicines and drugs you purchase outside the United States
- nutritional supplements (unless recommended by a medical practitioner to treat a specific illness diagnosed by a doctor)
- premiums for life insurance, income protection, disability, loss of limbs, sight, or similar benefits
- Scientology counseling
- social activities
- specially designed car for the handicapped other than an autoette or special equipment
- swimming pool or swimming lessons
- travel for general health improvement
- tuition and travel expenses to send a child to a particular school
- veterinary fees (unless they are for a guide dog or other service animal)
- weight-loss programs if the purpose of the weight loss is the improvement of your appearance, general health, or sense of well-being; however, you can deduct weight loss programs that are a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease).
Not only can you not deduct these expenses as an itemized deduction, you also cannot pay them with money from a Health Savings Account without incurring a 20% penalty.