Medical Deduction Income Restrictions

• Posted on April 24, 2008
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Presently, taxpayers can only deduct medical expenses if they itemize their deductions. In addition, medical expenses are only deductible if they exceed 7.5% of a taxpayer’s income (AGI), and then only the amount that exceeds that income limit is actually deductible. The income limit is a higher 10% for those taxpayers subject to the alternative minimum tax (AMT).

However, this all changes in 2013.  As part of the 2010 Health Care Legislation, the AGI limitation is being increased to 10% starting in 2013.  However, for seniors (age 65 or older and their spouses) the limitation is being phased-in over two years and remains at 7.5% for 2013 and 2014.  The table below reflects the changes:



Planning Strategy – Pay Discretionary Medical Expenses Before 2013
Taxpayers with potential discretionary medical expenses, such as orthodontist or dental work, vision care, etc., should consider having work done and paid for before 2013.

Once a taxpayer’s expenses exceed the income limits, every additional dollar spent on medical for the year becomes deductible. Therefore, once the minimum is met, it is important to utilize every legal expense. In addition, if you only marginally qualify for medical each year, it may be appropriate, when possible, to “bunch” medical deductions in one year to maximize the benefit.

Taxpayers whose medical expenses do exceed the income limitation should also make sure they do not overlook any deductible medical expense.