IRS Tax Tip 2014-21 points out that if a taxpayer intends to claim a deduction for medical expenses, there are new rules that apply that may affect these deductions for 2013. The IRS listed eight things that a taxpayer should be aware of about the medical and dental expense deduction:
1. AGI threshold increase. Starting in 2013, the amount of allowable medical expenses must exceed 10% of adjusted gross income (AGI) to be able to claim this deduction. The threshold was 7.5% of AGI in prior years.
2. Temporary exception for age 65. The AGI threshold is still 7.5% of AGI if the taxpayer or spouse is age 65 or older. This exception will apply through Dec. 31, 2016.
3. Must itemize. To claim medical and dental expenses the taxpayer must itemize deductions on the federal tax return. Thus, if a taxpayer claims the standard deduction, then no deduction for medical expenses.
4. Paid in 2013. You can include only the expenses you paid in 2013. If you paid by check, the day you mailed or delivered the check is usually considered the date of payment.
5. Costs to include. A taxpayer can include most medical or dental costs that paid for that taxpayer, the spouse and the dependents. Some exceptions and special rules apply. Any costs reimbursed by insurance or other sources don’t qualify for a deduction.
6. Expenses that qualify. The costs of diagnosing, treating, easing or preventing disease. The cost of insurance premiums for medical care, as does the cost of some long-term care insurance. The cost of prescription drugs and insulin also qualify. For more examples of costs you can deduct, see IRS Publication 502, Medical and Dental Expenses.
7. Travel costs count. A taxpayer may be able to claim the cost of travel for medical care. This includes costs such as public transportation, ambulance service, tolls and parking fees. For the use of a car, it may be possible to deduct either the actual costs or the standard mileage rate for medical travel. The rate is 24 cents per mile for 2013.
8. No double benefit. A taxpayer can’t claim a tax deduction for medical and dental expenses paid with funds from a Health Savings Accounts or Flexible Spending Arrangements. Amounts paid with funds from those plans are usually tax-free – the salary used to fund these accounts is usually not included in taxable income.
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