Wiley Tax Preparer: A Guide to Form 1040

CHAPTER 20

Medical and Dental Expenses

Ataxpayer who has qualified medical expenses may be able to deduct them as an itemized deduction. Medical expenses are subject to a 7.5% of adjusted gross income (AGI) limitation. The amount of the deduction for medical expenses will be limited to only the amount exceeding 7.5% of the taxpayer's AGI.

ALERT: Starting in 2013, the deduction will be limited to medical expenses exceeding 10% of AGI. However, if the taxpayer (or the taxpayer's spouse, whether filing a joint return or not) is age 65 or older, the taxpayer can continue to deduct expenses that exceed 7.5% of AGI through 2016.

Medical insurance premiums (that are not already excluded from income) are deductible as medical expenses and are subject to the 7.5% AGI floor. Self-employed taxpayers with a net profit for the year may deduct the premiums paid for themselves, their spouse, and children under age 27 as an adjustment to income without itemizing (see Chapter 17).

Itemized Deduction

Medical and dental expenses may be deducted without limit (see the “Qualified Medical Expenses” section later in this chapter for which expenses qualify). However, only those qualified expenses that exceed 7.5% of the taxpayer's AGI may be deducted.

Before calculating the limitation, the amount paid for medical expenses must first be reduced by any reimbursements from an insurance policy or other ...