Is there an amount of medical bills the IRS will not allow you to take off?

Question

I have a record number of medical bills this year I will be well over the 7.5 of my adjusted gross.

I have two questions

A- Is there an total amount the IRS will not let you deduct another words if I paid off $10,000 in medical bills will I be able to use all $10,000 or will the IRS say you can only deduct X amount of the $10,000.

B- My actual amount over 7.5% is almost $5,000 will I see a significant amount of money coming back to justify me trying so hard to pay them off this year, or would it be wiser to continue paying the monthly amount I have set up with the doctors and use the money for something else. I currently do not have any credit card debt to speak of.

Sign

Mark

Answer 1

As long as it's qualifying medical expenses (the irs website has a list as to what is considered qualifying medical expenses), then all of your medical expenses above 7.% of your AGI will be deductible. Of course, that is provided that your total itemized deductions are more than your standard deduction. If total itemized deductions (including your deductible medical expenses) are less than your standard deduction then your medical expenses won't do you any good.

Answer 2

If 7.5% of your income is $5,000, and you pay $10,000 in current year medical expenses, then you have a $5,000 medical deduction.

Add the medical deduction to all other deductions you can take on Schedule A.  If the total is more than your standard deduction ($5,450 single) , you may (or may not) get a tax benefit by paying off the medical expenses.  If the total is not more than your standard deduction, you get no benefit.

If you do not qualify to itemize, you may as well stretch out the medical payments.

If you do qualify to itemize, whether you pay off your bills depends on your tax bracket, the interest rate on your credit card, and the interest rate the doctor is charging.

Your medical deductions do not result in some of your expenses being returned to you.  The deduction only reduces tax you already owe, it does not put money in your pocket.  If you could reduce your taxable income by $5,000 (best case for you), and you are in the 15% tax bracket, then your tax is reduced by $750.  If you did not owe that much tax, you receive less tax benefit, or no tax benefit.

Answer 3

There isn't a maximum, and you already know that you can't  deduct the first 7.5% of your AGI.

If you are in a 15% bracket and already have met the 7.5% and have enough total itemized deductions to itemize, then additional deductions will save you taxes in an amount that's the additional deduction times your tax bracket.  So if you had an additional $10,000 in deductions and are in a 15% bracket, it would save you $1500 in taxes.  This assumes you still have taxable income even after the deductions - if the extra deductions would take your taxable income to zero, you don't get any benefit from deducting amounts over that.

Answer 4

Mark, in answer to your first question, there is no specific maximum amount that can be deducted for medical expenses.  Please keep in mind, however, a couple of other limits.  Your total deductions cannot exceed your taxable income; that is, your deductions cannot reduce your tax to less than zero.  Also, if your adjusted gross income (AGI) is more than $159,950, the allowable deductions begin to be phased out.

  As to your second question, if I understand it, you have some old medical bills.  This may be a judgment call based on your particular situation, but as a general rule, it's wise to pay off old debt as soon as possible.  Remember, the payments are deductible in the year paid.

Answer 5

In order to deduct medical bills you have to itemize your deductions.  

You subtract the 7.5% of income from the total amount paid in the year and deduct that amount.

If you have $10,000 of medical bills and 7.5% is $5,000, then the IRS will let you deduct $5,000.  But you have to have another $450 or more in itemized deductions in order to get the benefit of itemizing.