Depending on your health insurance policy, you may feel like you're being nickel and dimed every time you set foot in the doctor's office or pharmacy because of co-pays. Though co-pays for qualifying medical expenses will count toward the medical expenses deduction come tax time, you're going to need a lot of bills (or a small adjusted gross income) before they will reduce your taxes.
Qualifying Co-Pay Expenses
Your total medical expenses for the year include any co-pays you paid out of pocket for qualifying costs. These include expenses of seeing doctors and other medical professionals for checkups, diagnosis, preventative care and treatments, as well as vision and dental care. If you use prescription drugs or insulin, you can also count any co-pays you're required to pay for those treatments as well. However, if a co-pay is later reimbursed by your insurance company, you can't count those expenses.
Threshold for Deduction
The challenging part to actually lowering your taxes with co-pays is racking up enough to actually earn a tax write-off. The medical expenses deduction only allows you to claim expenses in excess of 10 percent of your adjusted gross income -- any amounts under that threshold aren't deductible. For example, if your adjusted gross income is $46,000, the first $4,600 of medical expenses aren't deductible on your taxes. If you have $4,700, only the last $100 actually lowers your tax burden.
Tax Year Timing
You can only include co-pays that you paid during the taxable year, regardless of when the medical services were actually performed. For example, say that you have surgery in December 2014 and pay the bill in January of 2015. That copay counts toward your 2015 tax return. On the flip side, if you prepay for your surgery in December 2014 but don't actually go under the knife until January 2015, you claim the deduction on your 2014 tax return.
Reporting Your Deduction
The deduction for medical expenses gets reported on Schedule A, which means you can't claim it and also claim the standard deduction. Depending on your other itemized deductions and the amount of your standard deduction, you might be better off not claiming it. For example, for the 2013 tax year, the standard deduction for single filers is $6,100. If you only have $200 in medical expenses and few or no other itemized deductions such as charitable donations or mortgage interest, not itemizing actually saves you more money.
- Internal Revenue Service: Publication 502 -- Medical and Dental Expenses
- Internal Revenue Service: Annual Inflation Adjustments for 2013
- Congress.gov. "H.R.3301 – Taxpayer Certainty and Disaster Tax Relief Act of 2019." Accessed Jan. 4, 2020.
- Internal Revenue Service. "IRS Provides Tax Inflation Adjustments for Tax Year 2020." Accessed Jan. 4, 2020.
- Internal Revenue Service. "Itemize or Choose the Standard Deduction." Accessed Jan. 4, 2020.
- Internal Revenue Service. "Schedule A Itemized Deductions." Accessed Jan. 6, 2020.
- Internal Revenue Service. "2019 Instructions for Schedule A (2019)." Accessed Jan. 4, 2019.
- Internal Revenue Service. "Publication 502 (2018) Medical and Dental Expenses." Accessed Jan. 6, 2020.
- Internal Revenue Service. "IRS Issues Standard Mileage Rates for 2020." Accessed Jan. 4, 2020.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."