Medical Expense Tax Deduction

What are the best medical expense tax deductions you can get?


You can take the tax deductions for medical expenses in a number of ways. The most common but not necessarily the best way is, by taking it as an itemized deduction.

To take the medical tax deduction on your itemized deduction form, the Schedule A is only your best option if you are an employee.

The main drawback of this medical tax deduction is that you can only deduct medical expenses above 7.5% of your income. Your medical expenses up to this amount are not deductible lowering your potential deduction considerably.

(Starting from tax year 2013 the threshold from which you can deduct medical expenses will be raised from 7.5% to 10% thanks to a provision in the Affordable Care Act.)

But if you have a business or you are self employed there are better ways to deduct your medical expenses.

  1. Self employed health insurance deduction You can deduct the health insurance part of your medical expenses deducted if one of the following is true: - You are self employed and have a net profit for the year - You receive wages from an S corp from which you own more than 2% (For the tax year 2010 only you were able to deduct you health insurance when you calculate your self employment tax not just from your federal income tax.)
  2. Medical Reimbursement plan This is a great way to pay for ALL your medical expenses through your business and make it tax deductible. To make use of this medical expense tax deduction you must be self employed and hire your own spouse in your business. The medical reimbursement plan will repay medical expenses for your employees and their families. In the medical reimbursement plan you specify which expenses and how much you want to spend for each employee. It is not taxable for the employees only if the plan is not discriminatory and benefits 70% employees. This makes this tax savings idea most attractive if your spouse is your only employee.


Updated December 24, 2012


› Medical Expense Tax Deductions


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