One of the only things less fun than having to go to the doctor for severe illnesses or procedures is having to pay the bill afterward. While you might want to forget about the costs as quickly as possible after you pay them, remembering what you spent at tax time could save you money. You won’t automatically get a tax refund for medical expenses, but if you are able to claim the deduction, it will lower your tax liability.
The amount you save by claiming the medical expenses deduction depends on your marginal tax rate and whether itemizing is beneficial for you in the first place. Generally, the higher your tax rate, the higher your savings will be.
Calculating Medical Expense Deduction Savings
To figure how much you’ll save from the amount that you deduct on your taxes for your medical expenses, multiply the amount of your medical expenses deduction by your marginal tax rate. Your marginal tax rate is the tax rate you pay on your last dollar of income. For example, if you can claim a $2,000 deduction for medical expenses, and you fall in the 22 percent tax bracket, you will save an additional $440 on your income tax return.
Expenses Threshold and Must Itemize
Just because you have medical expenses doesn’t mean you’ll be able to claim a deduction, however. First, the deduction is limited to the portion of your medical expenses that exceed 7.5 percent of your adjusted gross income. So, if your adjusted gross income is $45,000, the first $3,375 of your medical expenses aren’t deductible. If you had $5,375 in total qualifying medical expenses, you would only be able to deduct $2,000. Second, if you have sufficient medical expenses to claim on your tax return, you can only claim them if you itemize your deductions.
2018 Standard Deduction Changes
Because of certain changes under the Tax Cuts and Jobs Act, it’s less likely that your medical deduction will actually save you any money on your income taxes for the 2018 tax year. You can only claim the medical expenses deduction if you itemize your deductions on your return. But, the cost for itemizing is giving up the standard deduction. In 2018, the standard deduction jumps to $12,000 for singles, $18,000 for heads of household and $24,000 for couples filing jointly.
Higher Tax Savings in 2017
For the 2017 tax year, medical deduction savings are potentially larger for two reasons. First, the standard deduction is substantially lower at just $6,350 for singles, $9,350 for heads of household and $12,700 for joint filers, so it’s more likely you’ll be able to justify itemizing your deductions. Second, the tax brackets are higher than in 2018, so each dollar you are able to deduct for your medical tax deductions will save you a little bit more in taxes.
- IRS: Publication 502, Medical and Dental Expenses (Including the Health Coverage Tax Credit)
- Legal Information Institute: 26 U.S. Code § 213 - Medical, Dental, Etc., Expenses
- H&R Block: Can I Claim Medical Expenses on My Taxes?
- 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."