One common tax myth is the belief that you can deduct all medical expenses. This misconception can lead to incorrect tax filings and potential issues with the IRS. Here's what you need to know to stay compliant and avoid these pitfalls.

Origin of the Myth

• Expense Misinterpretation: Many people assume that any out-of-pocket medical expenses can be fully deducted.

• Lack of Awareness: There is often confusion about the specific criteria for deducting medical expenses.

Reality of Deducting Medical Expenses

• 7.5% AGI Threshold: You can only deduct the portion of your total unreimbursed medical expenses that exceeds 7.5% of your AGI. For example, if your AGI is $50,000, you can only deduct medical expenses that exceed $3,750.

• Qualified Medical Expenses: Only certain medical expenses qualify for the deduction. These must be essential for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any part or function of the body.

IRS Guidelines on Medical Expense Deductions

• Eligible Expenses:

• Deductible: Payments for doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and non-traditional medical practitioners. Prescription medications, inpatient hospital care, and payments for medical insurance premiums.

• Non-Deductible: Expenses for cosmetic surgery (unless it is necessary to improve a deformity related to a congenital abnormality, accident, or disease), health club dues, diet food, and non-prescription drugs (except for insulin).

• Documentation Requirements: Keep detailed records of all medical expenses, including receipts, bills, and payment statements, to substantiate your deductions.

Why the Myth Persists

• General Misconceptions: Many taxpayers believe that any out-of-pocket medical expenses are fully deductible.

• Anecdotal Advice: Misleading information and advice from non-professional sources perpetuate the myth.

Avoiding the Pitfall

• Understand the Threshold: Clearly understand that only medical expenses exceeding 7.5% of your AGI are deductible.

• Verify Eligible Expenses: Ensure that the expenses you are claiming meet the IRS criteria for qualified medical expenses.

What You Need to Do

• Calculate AGI: Determine your AGI to understand the 7.5% threshold for deducting medical expenses.

• Keep Detailed Records: Maintain accurate records of all medical expenses, including receipts and bills.

• Itemize Deductions: You must itemize your deductions on Schedule A (Form 1040) to claim medical expense deductions.

Consulting a Tax Professional

• Seek Professional Advice: Consulting a tax professional can ensure you correctly identify and claim eligible medical expense deductions.

• Accurate Records: A professional can help you maintain proper documentation and navigate the complexities of deducting medical expenses.