With the growing prevalence of high-deductible insurance plans, more and more Americans are paying out-of-pocket for routine healthcare. For many, this means that itemizing medical expenses is an option worth considering.

The small print

The problem is that most Americans never reach the financial threshold to make it worthwhile to deduct their healthcare costs. The IRS only allows you to deduct medical expenses after they reach 10% of your AGI (Adjusted Gross Income). In other words, if your income is $50,000 and you have $6,000 in medical expenses, you can only deduct $1,000. The first $5,000 (10% of $50,000) will not count. However, due to rising healthcare costs, a larger number of Americans are meeting the threshold.

When should you itemize?

When your total deductions are larger than your standard deduction it is worth itemizing deductions for your taxes. It can be difficult to know which is best for you but the IRS more fully explains your options and whether you should itemize or not. If you have made large out-of-pocket payments for serious illness of catastrophic care, it certainly worth running the numbers.

What counts as a medical expense?

Any medical expense that you pay-out-of pocket (and is not reimbursed) can be an includible expense. Remember, take care not to include any expenses already reimbursed by your employer, or paid back by your health insurance company, hospital or any other medical provider. That is considered tax fraud. If you pay medical expenses for a family member or dependent, and those expenses are not claimed by another taxpayer, these are also eligible deductions.

Common Deductions:

Insurance monthly premiums

These can really add up and be the primary deduction. According to the Kaiser Family Foundation, the average family with health coverage from their employer pays $5,277 in premiums each year. Individuals paying for care, even at low premium rates of $200-$300 per month are able to claim several thousand dollars as expenses.

Out-of-pocket payments

Any payments you’ve made to healthcare providers such as doctors, dentists, eye doctors and specialists are includible expenses as long as they have not been reimbursed to you. This includes amounts that you pay as co-payments, co-insurance, patient responsibility, or payments that applied to your deductible.

Emergency or catastrophic care

If you, or a dependent, paid for large bills from an emergency room visit or hospital stay those expenses can be included in your itemized deduction. This is particularly relevant to patients with high-deductible policies or no insurance, or if the emergency care took place in an out-of-network hospital. If you got hit with a massive surprise bill this can make a difference.

Prescription drugs

Any medication prescribed by a doctor is an included expense, even your co-payment. In general, over-the-counter medications, painkillers, cough syrups, etc., cannot be deducted from your taxes. There are notable exceptions to this rule, such as insulin which is available over-the-counter but is an included expense for diabetics.

Less well-known deductions:

Mental health and wellness treatments

The IRS allows all out-of-pocket payments for mental health care and therapy that are not reimbursed by health insurance. Since many therapists and psychiatrists don’t take insurance, this is a benefit that everyone should know about. It extends to other wellness care, including acupuncture, chiropractic care, and addiction treatment. Unfortunately, your gym membership, teeth whitening, and dancing lessons are all excluded.

Travel and accommodation expenses

If you are looking after a dependent or yourself, travel for medical purposes — even out of state — is an allowed deduction and can include mileage to the hospital, flights, hotel bills and parking.

And lots more…

Fertility treatments and other family planning services, vision correction surgery (including LASIK), stop smoking programs, and certain disability-related improvements to your home are just a few examples of less-well known deductions.

The IRS provides a full list of eligible and ineligible deductions.

Planning for 2017 taxes:

Tracking and itemizing medical expenses can be easier than you imagine–

1. Check out all of the medical expenses accepted by the IRS. You may be surprised to discover how many items are covered.
2. Track your receipts and categorize your expenses in Mint.
3. Total up your expenses for the year and add them to your deductions.

Although we hope you find this information useful, this is not tax advice. Please consult a qualified tax professional if you have any questions.