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TAX TIP OF THE WEEK - Are health care costs deductible? It depends, but probably not. Health care costs are part of your itemized deductions so there are two hurdles to make them deductible: Your deductions must be large enough to itemize rather than taking the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filers. Other items that make up your itemized deductions are the first $10,000 of your state taxes, your mortgage interest on your primary residence and your charitable giving. If you had $10,000 in state tax plus $9,000 in mortgage interest, you would need another $9,000 in charitable giving or deductible medical expense to itemize your deductions. Getting enough costs to itemize under the current tax law is challenging and only 9.5% of filers itemized last year compared to 36% under back in 2005. Let’s say you get over that first hurdle and can optimize, the second hurdle is even higher. Only medical costs that exceed 7.5% of your adjusted gross income (AGI) will be consider for your itemized deductions. If you have a $150,000 in salaries along with $10,000 in investment income and $200,000 in practice profits for an AGI of $360,000, your medical expenses over $27,000 would be deductible. Since most insurance policies have out of pocket max limits far below this amount, it is unlikely your medical costs would ever exceed that amount. The most common use of the medical deduction is for end of life medical care paid for with cash. But all is not lost because as a business owner, you are allowed to have your company pay your families medical premiums as a deductible cost.
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