Medical and Dental Expenses
Many people don’t know they can deduct medical and dental expenses on their Federal Tax return. Of those who do, many don’t know what is and is not deductible and how. Here are some basics for you to consider: If you are a non-owner employee receiving Medical or Dental Insurance coverage through your employer you cannot deduct the expense of your insurance costs but you can choose to have your premiums withheld pre-tax which lowers your total withholding on every paycheck vs. after tax. You can also deduct your copayments, any out of pocket expenses that are not-reimbursed to you, and any mileage to and from services, as well as any cost for prescriptions and prosthetics not covered by your insurance. The only catch to this deduction is that your total expenses must exceed 7.5% of your Adjusted Gross Income on your 1040 or it will not count towards your total deductions on your income and then only the amount over 7.5% becomes a deduction.
Health Savings Accounts and withdrawals from your Flexible Spending Accounts may be tax free to you if it is for qualified medical expenses. If you are a business owner your business structure helps to determine how you may benefit from these expenses. As a Sole Proprietor you would enter insurance premiums on your Schedule C and any additional expenses on your Schedule A with all the 7.5% rules applying to your additional expenses.
If you a small business owner as a Corporation (S-Corp or LLC) your premiums become an expense on your 1120 or 1065. You can still deduct additional expenses on your Schedule A when you file your personal return and the 7.5% rules apply to you personally there as well. As always, there are some qualifiers and additional exceptions and concerns the IRS has outlined in Publication 502 Medical and Dental Expenses and you should take a look at what they say there to ensure you are not mis-reporting.
Even though you are most likely using software to report you still need to know where to put these expenses so the software can figure the correct tax for you. If you are unsure, call us for clarification or a free tax consultation.