10 most overlooked tax deductions
October 2, 2009 · Tagged with Taxes
Getting Fit Gives Deductions a Leg Up
Staying healthy can cost you an arm and a leg; therefore, the IRS allows you a deduction specifically for medical expenses, but only for the portion of expenses over 7.5% of your AGI. Thus, if your AGI is $50,000 you can deduct the portion of your medical expenses over $3,750. If your insurance company reimburses you for any part of your expenses, that amount cannot be deducted.
According to the National Coalition on Healthcare, in 2007 the average individual paid $4,400 just for insurance premiums, and the average family of four paid $12,000. Therefore, if you’re an individual making $50,000 you could deduct $650, the amount of the premium that exceeds the 7.5% limit. (Remember, you can’t deduct your premiums if you buy coverage through a payroll deduction using pretax dollars – in that case you’ve already earned your tax savings.)
A portion of money you pay for long-term care insurance can also ease your tax burden. Long-term care insurance is a deductible medical expense, and the IRS lets you deduct an increasing portion of your premium as you get older.
There’s another often-overlooked benefit when you visit your doc: you can deduct the cost of transportation to obtain medical care, which means you can write off the expense of taking the bus, car expenses (the standard mileage deduction for medical purposes), tolls and parking.
You can also deduct any additional copayments, prescription drugs, lab fees and more as part of your medical expenses – if your total expenses exceed the 7.5% limit. The IRS also allows you to factor in common fees and services if they are not fully covered by your insurance plan, such as therapy and nursing services. In fact, the IRS’ definition of medical expenses is fairly broad and can even include such items as acupuncture and smoking-cessation programs.
Conclusion
The slips of paper you cram into your wallet can mean more money in your bank account come tax season. Hold on to receipts for services, and keep a file throughout the year so you have a record of even the smallest expenses you incur for business, for charity and for your health. As those expenses add up, they can start to lower your tax bill.