I know you can deduct medical bills from your taxes...?

Question

Would it be worth it to pay off all medical bills with a credit card before Dec 31st? Would it increase my refund greatly or not enough to make it worth it?

Answer 1

The answer as always is... It Depends!

1. What is your Adjusted Gross Income? Medical bills have to be at least 7.5% of your AGI to qualify as an itemized deduction. Then only the amount that is OVER 7.5% of AGI is deductible.

2. Is this the only itemized deduction you will have? If so, then I doubt that it will be worth it unless you have some really large (multi-thousand dollar) medical bills that will push you above the standard deduction amount of $5,350 for single and $10,700 Married filing jointly.

3. Are you going to pay off the credit card immediately? If not then this would be a very bad decision. The interest charges on that credit card would very quickly eat through any extra refund you would get and actually cost you more money in the long term.

In the end, it would always be best to consult with a good local accountant who can be familiar with the full details of your situation.

Answer 2

Depends on some states but usually you can deduct any amount over a certain percentage of your income. It works this way so you can't deduct the usual expenses but if you have a major illness or something, you are able to deduct those. In the future you might want to look into a medical savings plan that lets you put some pre-tax money aside to pay for medical costs. In the past you would lose the money you didn't spend during that year, but now they have done away with the downside.

Answer 3

It would be unusual to generate a large refund by paying off medical bills.

Let's say you are in the 15% tax bracket, can itemize and even have enough medical bills already paid to take medical deductions, and then you pay off an additional $5,000. This additional deduction will save you $750 of the taxes you owe. If you owed no tax, you get no benefit at all. If you owed more than $750 in tax, your refund has increased by $750.

If you can get a low interest loan using a credit card, and can pay off the loan while it is low interest, it might make sense.

Answer 4

If you are trying to bunch up your medical bills into one year because you know that splitting them into 2 years won't give you any benefit, then it might be worth it. Charging them on credit cards is considered payment according to the IRS even though you haven't paid the credit card off yet. What these folks are saying is true, it might not be worth it if you don't have the funds to pay the card off immediately and sink a bunch of money into nondeductible credit card interest.

Answer 5

You have to spend up to a certain percentage of your income on medical bills before you can even consider deducting the remainder (only) of your medical expenses. Right off-hand, I do not recall that percentage; but, I think it is around 6%. As an example: Your income is $30,000 a year (I think it is gross). Your medical expenses total $2,000. 6% of 30,000 is $1800. In this case, you would only be able to deduct $200.00. This example assumes that rule applies to GROSS income and that 6% is the correct percentage. You can obtain more accurate information in that regard in the Instruction phamplets; but my first sentence is still accurate and should give you a good idea of what to expect in making your decision. .

Answer 6

That depends on how much the bills are. If they are under 7.5% of your adjusted gross income, then there is no tax benefit anyway.

If you itemize, then you can deduct the portion of your medical bills that's over 7.5% of your AGI - the tax benefit at most is the deductible amount times your tax bracket percent.

Answer 7

Depends on how much. They have to add up to more than 7.5% if your annual gross income, and you would have to itemize your deductions. So if they're more than 7.5% of your AGI, but all your deductions are still less than the standard deduction (the amount depends on your marital status and age) then it won't do you any good.

Answer 8

You can only deduct if you have a pre-tax medical flexible spending account through your employer or if your medical bills took up a very large proportion of your income (such as you underwent major surgery or cancer treatment and were not insured) and you itemize your deductions. Unless you have substantial expenses, you shouldn't consider it and you'd want to talk to your accountant first before going forward.

Answer 9

You can deduct expenses that EXCEED 7.5% of your gross income. So it really depends on how much you spent on medical expenses, and how much you earn.