Medical Deductions for Senior Citizens Part I

Many senior taxpayers claim the standard deduction on their annual income tax return instead of itemizing deductions. Often seniors pay little or no mortgage interest, and they usually don’t owe much for state and local income and property taxes. Most of the common itemized deductions don’t add up to much for seniors. Add to that the fact that taxpayers over age 65 are entitled to larger standard deductions, and it is easy to see why many seniors don’t itemize. Nevertheless, if they have significant medical expenses, they should consider itemizing.

Medical expenses are often one of the largest expenses for retired people. Fortunately, some medical expenses are deductible. These include health insurance premiums (including Medicare premiums), long-term care insurance premiums, prescription drugs, nursing home care, and most other out-of-pocket heath care expenses paid for yourself, your spouse, and your dependents.

If you itemize your deductions instead of taking the standard deduction, medical expenses are deductible on Schedule A of your tax return. However, they are deductible only to the extent they exceed 7.5% of your adjusted gross income (AGI). Also, the 7.5% limitation is a temporary exemption from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. (If under 65, or after December 31, 2016, it’s a 10% limitation.)

Here is a summary of what expenses you can take for the medical expense deduction:

Premiums for Medicare Parts B, C, and D Coverage

Taxpayers enrolled in Medicare can deduct Medicare Part B coverage (for medical costs other than hospital bills), Part C coverage (for Medicare Advantage policies), and Part D coverage (for prescription drugs) as medical expenses. These Medicare premiums are generally withheld from your Social Security benefit payments. You can find the premium amounts for each year on Form SSA-1099 (Social Security Benefit Statement) which you should receive shortly after the end of each year.

If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare Part A. The payroll tax paid for Medicare Part A is not a medical expense. If you are not covered under social security (or were not a government employee who paid Medicare tax), you can enroll voluntarily in Medicare Part A. In this situation you can include the premiums you paid for Medicare Part A as a medical expense.

Premiums for Supplemental Medicare Coverage (Medigap Insurance)

Premiums paid for Medicare supplemental insurance policies are deductible as well as premiums for dental and eye insurance.

The medical expense deduction summary will continue… next week.

-Patti Spencer