Medical Deductions For 2010: What You Need to Know

Kiplinger Personal Finance

The list of medical costs that can be deducted stretches to the Mayo Clinic and back, but few taxpayers get any tax benefit. The reason for the seeming contradiction is twofold.

First, to get any benefit, you must itemize deductions (which most taxpayers don't). Second, you get a tax break only to the extent your total unreimbursed medical costs exceed 7.5 percent of your adjusted gross income (if your AGI is $50,000, then, the first $3,750 of medical expenses don't count).

Considering these restrictions, it's critically important that you total up all your deductible expenses and that you know which expenses you can deduct. In addition to what you pay for your own medical care, you can count what you pay for your spouse and anyone you claim as a dependent.

If you were divorced during the year but paid medical bills incurred by your spouse while you were married, you can deduct those costs even though you file a separate return. You also can include in your deductible medical expenses any qualifying bills you pay for your child, even if he or she is claimed as a dependent by your ex-spouse.

WHAT'S DEDUCTIBLE: A to Z

Abortion. You can include the expenses of a legal abortion.

Acupuncture. The cost for such treatment is deductible.

Alcoholism. Payments to a treatment center qualify, including the cost of room and board.

Animals. The cost of guide dogs to aid the blind, deaf and disabled are deductible.

Artificial limb. The cost of the prosthesis and associated expenses are deductible.

Assisted living. A portion of the entrance fee and monthly or annual fees for an assisted living facility can qualify as medical expenses.

Automobile expenses. If you drive your own car to get medical care, you can deduct 16.5 cents a mile for medical driving in 2010, plus any parking or toll charges. The rate for 2011 is 19 cents per mile.

Birth control pills. As with other prescribed medicines, the cost is deductible.

Blood sugar test kits for diabetics.

Blood transfusions.

Braille books and magazines. The amount by which the cost exceeds that of regular reading material may be written off.

Breast reconstruction surgery following a mastectomy.

Canadian drugs are not deductible. Although many Americans save money by purchasing prescriptions from Canadian pharmacies, the costs may not be deducted.

Car. The cost of outfitting an auto with special controls needed by a handicapped person may be included with your medical expenses.

Car expenses. If you drive your own car to get medical care, you can deduct 24 cents a mile for medical driving in 2009, plus any parking or toll charges. The rate for 2010 is 16.5 cents per mile.

Childbirth preparation classes. The IRS says fees for the mother qualify, but fees for the father-coach do not.

Chiropractors. Their fees qualify.

Christian Science practitioners. Fees are deductible.

Contact lenses. The cost qualifies, as does the cost of insurance against their loss.

Cosmetic surgery, if necessary to ameliorate a deformity arising from a congenital abnormality, injury or disease remains deductible; not if the surgery directed at improving appearance rather than meaningfully promoting proper function of the body.

Crutches. What you pay to buy or rent crutches or other medically necessary equipment is deductible.

Damages. If you receive a settlement in a damage suit that includes money for future medical expenses, the amount is not taxable, but neither are those future medical expenses deductible until they exceed the amount of the award allocated to medical care.

Dental treatment. The cost of everything from diagnostic x-rays to orthodontic treatment to dentures qualifies, including treatments not covered by your insurance.

Doctor's fees. When adding them up, count payments to anesthesiologists, dermatologists, gynecologists, neurologists, obstetricians, ophthalmologists, osteopaths, pediatricians, podiatrists, psychiatrists, surgeons and any other recognized medical practitioners.

Drug addiction treatment. As with treatment for alcoholism, treatment for drug addiction is deductible.

Eyeglasses. Include in the deductible amount the fees for eye exams as well as the cost of the glasses.

Fertility treatments.

Full-body electronic scan.

Guide dog. Medical expenses can include the cost of a guide dog for the blind or deaf, including the cost of the dog's care.

Hearing aid. The cost of the device itself and associated fees are deductible.

Home improvements required by medical conditions -- such as a filtration system to combat allergies or an entrance ramp for a disabled homeowner -- to the extent they do not increase the value of the home.

Hospitalization. The costs, including the cost of meals, not covered by insurance are deductible.

Imported drugs are not deductible. Although many Americans save money by purchasing prescriptions from Canadian and other foreign pharmacies, the costs are not deductible.

Insurance. Premiums you pay for health insurance, prescription drug insurance, contact lens replacement insurance, Medicare Part B and Medicare Part D, Medicare supplemental policies, student health fees and a portion of long-term care policies are all deductible. (Self-employed taxpayers can qualify to deduct insurance premiums as an adjustment to income rather than a medical expense and thereby avoid the 7.5 percent rule that applies to other medical expenses.)

Kidney donor expenses.

LASIK or other vision correction surgery.The cost is an allowable medical expense.

Lead-based paint removal. This is one of the stranger examples of the way the IRS views qualifying medical expenses. You can count as a deductible expense the cost of removing lead-based paint if the paint is within the reach of a child who has suffered from lead poisoning. The cost of removing paint out of the reach of the child doesn't count toward the medical deduction, nor does the cost of repainting the scraped area.

Long-term care insurance. You can also include in your medical expenses part of what you pay for long-term care insurance. The maximum annual write-off is based on your age, ranging in 2010 from $330 for those younger than 40 to $4,110 for those older than 70.

Medicare Part B premiums. This is an easy-to-miss deduction, since the cost is deducted from Social Security benefit checks. Don't make that mistake. The premiums are deductible.

Medicare Part D premiums. Add the premiums to your other deductible expenses.

Medicine. Include in your deductible medical expenses what you pay for any prescription medicines and insulin. The cost of over-the-counter medicines is not deductible.

Non-prescription drugs. The cost of over-the counter medicines is not deductible, and you can no longer pay such costs with pre-tax dollars by using a medical reimbursement plan at work. That opportunity ended at the end of 2010.

Nursing homes. Nursing home fees can quickly mount up to 7.5 percent of almost anyone's income. If the availability of medical care is the primary reason a person is in the institution, the full cost can be deductible, even though much of the cost is actually for otherwise nondeductible expenses such as food and lodging.

Nursing services. Include in your medical expenses wages and other amounts you pay for nursing services, including social security taxes you pay on the caregiver's wages.

Organ donor expenses. If not reimbursed, such costs are deductible medical expenses.

Oxygen. The costs of oxygen equipment and oxygen to relieve breathing problems that are caused by a medical condition are deductible.

Physicals. The IRS now says the cost of routine annual physicals is deductible.

Podiatrists fees. Although sometimes not covered by insurance, such costs are deductible.

Pregnancy test kit. The IRS says the cost is now deducible.

Prescription drugs. The cost is deductible.

Psychoanalysis. Fees paid for psychoanalysis are deductible.

Psychologist. Also count what you pay a psychologist for care.

Student health fees. Colleges and private schools sometimes include in their tuition charges a fee for student medical care. If you can get a breakdown of the bill showing what part of the total goes to those fees, you can include that amount in your deductible medical expenses.

Seeing eye dog and its maintenance.

Stop-smoking program.

Sterilization. The cost of such an operation, including a vasectomy, is deductible.

Swimming pools, if medically necessary but, as with other medically required home improvements, only to the extent that the cost exceeds any addition to the value of your home.

Telephone. What you pay for special equipment to permit the deaf to communicate over the phone is deductible.

Television. The cost of a decoder so that a TV picks up closed-caption signals for the hearing impaired can be included with your medical expenses.

Travel expenses to get medical care. This includes bus and subway fare or ambulance hire or, if you drive your own car, 16.5 cents a mile in 2010, plus parking and tolls. (The mileage rate rises to 19 cents for 2011 driving.) Out-of-town travel counts, too. If you stay in a hotel while you're receiving treatment in an outpatient clinic, you can include up to $50 a day in your deductible medical expenses. The daily dollar limit is per person. If you travel with a sick child to get medical care, for example, you could deduct up to $100 a day for your lodging expenses. And if you have to stay in a nearby hotel while a child is hospitalized, you may deduct up to $50 a day of your costs.

Vasectomy. To the extent the cost is not covered by insurance, it is deductible.

Vision correction surgery, such as LASIK. Your out-of-pocket cost is deductible.

Weight-loss program, if recommended by your doctor as part of the treatment for a specific medical problem, such as hypertension or obesity.

Wheelchair. Whether manual or motorized, its cost is deductible.

Wig for the mental health of a patient who's lost hair due to a disease.

X-rays. Any cost not covered by insurance is deductible.

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Personal Finance - Medical Deductions For 2010: What You Need to Know