Medical expenses continue to be the fastest growing expense of a family’s budget.  Some estimates place the increase from 2005 to 2006 at around 9%.  When you stop and think about the increasing cost of medical insurance that the average person must pay out of pocket, and couple that with prescription drug costs, it is probably not an unrealistic number.

With this in mind, the government has been nice enough to give us a tax deduction on medical expenses.  But there is a caveat to it; only medical expenses that exceed 7.5 percent of adjusted gross income are deductible on your federal income tax return and that assumes that your are using itemized deductions (filing Schedule A of your 1040 tax return).

Some of you may be saying to yourselves “I have no idea how much I’ve paid in for the year” and your answer would not be surprising at all.  It seems to be a common occurrence that many seniors are not including all of their medical expenses when they file their tax returns.  With the fixed incomes (from pensions and Social Security), 7.5% may not be that hard to achieve.  Listed below are some of the more common medical expenses that can be included to determine whether your medical expenses are large enough for you to take an itemized deduction for medical expenses on your tax return:

•  The use of an automobile or other method of transportation to see a physician.

If you pay a fee for any form of transportation (whether it is a taxi service or bus to go to a doctor’s office, that fee qualified as an expense that can be deducted. )

• Capital expenditures to modify a home for a handicapped person.

Any kind of modification made to a house is deductible.  It may be a ramp in front of the house, making doorways larger, or something more mundane, such as installing a handle in the bathtub area, but they all qualify.

• Contact lenses and glasses.
• Unreimbursed doctor and dental bills.  (Any out of pocket co-payments are fully deductible.)
• The cost of prescription drugs.

prescriptions filled with them for 2005.  They will provide you with an itemized listing by date of your out of pocket costs which you can use.

• Health Insurance premiums and/or Long Term Care Insurance Premiums.

• Living expenses in an Assisted Living or Nursing Home facility.

Not all expenses paid for to an Assisted/Assistive Living and or a Nursing Home facility necessarily qualify for the deduction.  This is by far the biggest expense of an annual budget and can easily exceed $10,000 a year.

• The payment for an aide or nurse.

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Any type of skilled staff, such as an aide, caregiver can qualify, as long as the individual is being paid on the books.  We offer a cost effective payroll service to make this as easy as possible for those interested in doing this.

• Medical Equipment such as wheelchairs, canes, walkers and commodes.

• The cost of a hearing aid.

• The cost of hospitalization.

The above represents just a few of the more common medical expenses available to a taxpayer for a medical deduction that are easily overlooked.  Also, please keep in mind that your tax records can be amended up to three years after filing.  This means that it is still possible to amend your tax returns going back to 2004.  There is certainly no need to give the government anything more than what they are entitled to.  If this all seems so overwhelming and you need some help in order to put this information together, please feel free to contact us.