Writing Off Medical Expenses

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! If this is your first time here, welcome! We’re delighted to be able to share up-to-date information about taxes, bookkeeping, and accounting. Our blog is also dedicated to educating you about tax-advantaged savings accounts, tax provisions, programs, and more! We aim to provide you with the tools needed to meet your short and long-term goals. Our seasoned professionals are experts on the tax code, eligible deductions, and QuickBooks—all necessary fundamentals for saving you money! The Hoods Family has been around since 1988 and our comprehensive accounting and tax planning services are among the best in the Lowcountry. If you’re in need of tax preparation, accounting, QuickBooks training, or business consulting services, do not hesitate to schedule an initial consultation! Tax season is upon us. We recommend preparing early to maximize your savings and refund. We do offer contactless services using a combination of over-the-phone consultations and digital drop-offs, for safety and convenience. You can read more about our hours and submit a request for a meeting using our website!

It’s tax season, everyone! For us, tax season is an exciting time of the year. We prepare year-round to help individuals and small businesses reap the best refund possible and owe the littlest amount possible. The past two years have seen two of the most complicated, unpredictable tax seasons yet. This year is shaping up to be no different, with experts predicting delays and many families stuck with figuring out how having received the Advance Child Tax Credit will affect their return. Not to worry! Not only is Hoods here to help, we already published an article addressing just how to tackle this tax season! Our last article provided a list of important dates so you could begin marking your calendar. We explained when to expect your refund, based on how you choose to file your tax return. We also made a checklist of documents you’ll need to have on-hand before filing. We discussed how to calculate your withholding and how to find a tax professional! (Hint: We’re here to help!) Hoods Tax & Accounting offers a secure digital portal for uploading documents, providing e-signatures and making necessary payments. At Hoods, we try to make tax season as simple and painless for our clients as possible. Instead of worrying or procrastinating, use our last article to tackle your taxes easily and efficiently! 

Speaking of tax returns, did you know you can write off your medical expenses? Well, some medical expenses. For an eligible few, healthcare premiums and medical costs are considered deductible. Not many people are aware of this provision and, as such, are missing out! Today, we’re going to explain exactly how this deduction works and who’s eligible to take advantage. With healthcare costs rising, it’s never been more essential to ensure you’re utilizing every available credit. As well, you should never forgo medical care due to the cost. We hope this article will help and, without further ado, let’s dive in! 

Who can deduct their medical costs?  

The medical expense deduction applies to those taxpayers who have spent over 7.5% of their adjusted gross income on qualified medical expenses. If you have health insurance provided by your employer (or your spouse’s employer), you are not eligible to deduct your medical expenses. Likewise, if you are eligible to receive healthcare through your employer (or your spouse’s employer) and you opt out, you are not eligible to deduct your medical expenses. If you pay for your own health insurance out-of-pocket–and are not reimbursed by an employer–then you are eligible to deduct qualified medical expenses. 

How much can you deduct? 

For those looking to deduct their medical expenses, you’ll first need to determine your adjusted gross income. This might require a little bit of math, but it’s too hard to figure out. Start with your gross income, which is the entirety of what you (or you and your spouse) made during the year. This includes wages, dividends, alimony, capital gains, social security payments, pension payments, unemployment payments, revenue from your businesses (including real estate), retirement distributions, and any other form of taxable income (according to the IRS). Once you have your gross income, you’ll subtract qualifying expenses. These qualifying expenses might include: IRA contributions, student loan interest, child care expenses, business expenses, moving expenses (for active military members), deductible HSA contributions, deductible tuition or school fees, charitable contributions (up to $600 with standard deduction), and more. 

Sometimes, depending on the complexity of your financial situation, it’s necessary to consult with a professional tax preparer to determine your AGI. It’s important your reported AGI is accurate, as your adjusted gross income is your taxable income. An inflated AGI could mean you pay more than you need to, while an underestimated AGI could mean owing the IRS money. As well, an inaccurate AGI will screw up the next part of determining how much you can deduct. 

Once you have an accurate adjusted gross income, you’ll need to calculate what 7.5% of your AGI is. For example, if your adjusted gross income is $130,000 annually, then 7.5% is $9,750. This means you’re eligible to deduct unreimbursed medical expenses when they exceed $9,750 in a tax year. If you spent $22,000 on medical bills in the same year, $12,250 would be the maximum amount you could deduct. 

However, only certain kinds of medical expenses are deductible according to the IRS. These deductible medical expenses include: payments to medical practitioners (i.e. doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists), nursing home care, hospital care, acupuncture, prescription drugs (including insulin), addiction programs and rehabs, weight loss programs (prescribed by a doctor), dentures, eyeglasses, contacts, hearing aids, crutches, wheelchairs, service animals, transportation to medical care, cost of medical conference (for diseases you or your spouse have), insurance premiums, and more. For a full list of eligible medical expenses, visit the IRS’s Publication 502. 

You cannot deduct medical expenses which were not paid in the tax year for which you are filing your return. Likewise, you cannot deduct medical expenses which have been reimbursed, by insurance or an employer. Medical expenses which are not deductible include: funeral expenses, vacations, (a majority of) cosmetic surgery, over-the-counter medications, nonprescription nicotine substitutes, and hygienic products. 

What if you’re self-employed? 

Health insurance premiums became entirely deductible for those who are self-employed as of 2003. Self-employed individuals, as well, do not need to itemize to take advantage of this deduction (as the health insurance write-off is found on the first page of Form 1040). You cannot be the spouse of someone who is eligible to participate in an employer-subsidized health plan and take advantage of this deduction. As well, this deduction cannot exceed the amount of income you earned from your business in the year for which you’re filing. 

How do you claim a tax deduction for medical expenses this tax season?

To take advantage of medical expense deductions, you have to itemize your deductions. The standard deduction for the 2021 tax season is $12,550 and it’s not recommended you itemize unless you anticipate your deductions exceeding this amount. If you choose to itemize, you’ll use Schedule A–a form you’ll attach to your 1040–to calculate the amount of your deduction. You’ll want to have kept all receipts and medical records pertaining to deduction. (If you threw these receipts or records away, you can request them from your medical provider or pharmacy). Filing an itemized deduction can be quite tedious. You might want to consider consulting a professional tax preparer, as they’ll be able to answer any questions you may have and ensure your deductions are made correctly. ​


The medical expenses deduction is a helpful tool for those who have been paying out-of-pocket for healthcare costs. With the ongoing pandemic and the constant need for affordable medical care, this deduction offers many a way to save money and receive care. We hope you’ll take advantage of this deduction. If you need help figuring out how or would like a professional tax preparer to handle the logistics for you, we’re here to help! At Hoods, we offer bookkeeping, accounting, and business consulting services. As well, we offer tax preparation, payroll, and QuickBooks training! If you have any questions or are interested in a consultation, do not hesitate to reach out. We do offer virtual consultations over Zoom, as part of our effort to accommodate everyone in these trying times. We look forward to hearing from you! Thank you for taking the time to read and we hope you’ll return for future learning! Until next time!