Tax deduction on medical bills

[d_law]

What is the name of your state?NY

Hi

Can we apply tax deductions on medicall expenses that is not covered by the
insurance . I might have to spend around $5000 out of my pocket for some medical procedure.

Please advise if anyone knows abt this

Thanks

 

[Sam111]

You can claim qualified medical expenses as an itemized deduction on Schedule A. It is allowed to the extent that they exceed 7.5% of your adjusted gross income.

 

[abezon]

And you have to be itemizing.

 

[d_law]

You can claim qualified medical expenses as an itemized deduction on Schedule A. It is allowed to the extent that they exceed 7.5% of your adjusted gross income.

Thanks for the answer

7.5% of gross income on medical bills or for doing itemized deduction?

 

[Sam111]

Example:
Adjusted gross income 50,000

Qualified medical expenses 5,000 - 3,750 (7.5% of AGI) = 1,250 allowable

In addition, your total itemized deductions must exceed your standard deduction to even claim this.

 

[d_law]

Example:
Adjusted gross income 50,000

Qualified medical expenses 5,000 - 3,750 (7.5% of AGI) = 1,250 allowable

In addition, your total itemized deductions must exceed your standard deduction to even claim this.

Thanks

so if my salary is more around 70k , i cannot use this
Is that right??

 

[Sam111]

That's right.

Edit: Your adjusted gross income. Not your salary, since you may have adjustments or losses to come to the AGI.

 

[d_law]

That's right.

Edit: Your adjusted gross income. Not your salary, since you may have adjustments or losses to come to the AGI.

Sam111

Thanks for helping me out here , how do we calculate the gross income?

My company is providing Flexible spending account to accomodate this kind of things , but if I dont use it I will loose all the money. In my case I will not be sure If have to do this the next yr

 

[Sam111]

Take a look at a Form1040 . You will see how it is calculated on the front page.

 

[abezon]

If you pay for the expense with a flex spending account, you can't deduct the expense on schedule A. This is because the money was never included in your w-2 income anyway. That's why flex spending accounts are great.

You can handle extra year-end money in flex accounts by pre-paying medical expenses for the next year in December. For example, you could pre-pay the full price of the braces or pre-pay the chiropractor/therapist.

Another possibility is to split the $5000 over 2 tax years -- pay part in 2005 & part in 2006. You could set up the flex spending in January. If you'll know by August whether you'll need the procedure, you can either pre-pay part of it or stop paying into your flex account in August & just spend the accumulated money over the rest of the year.

 

[d_law]

If you pay for the expense with a flex spending account, you can't deduct the expense on schedule A. This is because the money was never included in your w-2 income anyway. That's why flex spending accounts are great.

You can handle extra year-end money in flex accounts by pre-paying medical expenses for the next year in December. For example, you could pre-pay the full price of the braces or pre-pay the chiropractor/therapist.

Another possibility is to split the $5000 over 2 tax years -- pay part in 2005 & part in 2006. You could set up the flex spending in January. If you'll know by August whether you'll need the procedure, you can either pre-pay part of it or stop paying into your flex account in August & just spend the accumulated money over the rest of the year.

abezon and Sam111

Thanks for your inputs. We got a mail from our HR last week saying that if the expenses are more than 7.5% of your gross income, we can apply for tax exemption.

abezon.
The confusion I have is about when the procedure will happen. If everthing works out well , we dont have to do this , if not doctor will recommend. I checked with them again and it can cost anywhere upto $8000. The flexible spending allows up to 5000 , But like u said if I dont have to use it it will be gone

 

[abezon]

Get the doctor to split the fee over 2 years, so you pay $5000 in year 1 & $3000 in year 2. Obviously, this will require some long-term planning between you & the doc & the HR department.

 

[d_law]

If you pay for the expense with a flex spending account, you can't deduct the expense on schedule A. This is because the money was never included in your w-2 income anyway. That's why flex spending accounts are great.

You can handle extra year-end money in flex accounts by pre-paying medical expenses for the next year in December. For example, you could pre-pay the full price of the braces or pre-pay the chiropractor/therapist.

Another possibility is to split the $5000 over 2 tax years -- pay part in 2005 & part in 2006. You could set up the flex spending in January. If you'll know by August whether you'll need the procedure, you can either pre-pay part of it or stop paying into your flex account in August & just spend the accumulated money over the rest of the year.

abezon

I was reading your posts again , Got a question about the following option u told me

"
If you'll know by August whether you'll need the procedure, you can either pre-pay part of it or stop paying into your flex account in August & just spend the accumulated money over the rest of the year."

I was talking to someone in HR and they were saying that once I signup for this , I cannot make any changes until the end of the year,

How can I stop paying to flex account then?

 

[abezon]

Convince HR to change the policies.