Did you know that in Arizona, health care expenses can be deducted from your tax return? Were you thinking, like many others, that since total medical expenses are typically lower than the Federal exemption that they do not qualify on your Arizona return? The answer is, health care related expenses can be itemized and qualify for a deduction on your state return if filing in Arizona. Form 140 Schedule A should be used to itemize deductions.
William Perez in Tax Planning Tips for Reducing Taxes Using Medical Expenses teaches us that medical expenses can qualify for various tax breaks:
‘Medical expenses that meet certain qualifications may be eligible for an itemized deduction for medical expenses, or tax-free reimbursement from a flexible spending account, health reimbursement account, or health savings account. Total medical expenses in excess of 7.5% of a person's adjusted gross income can be deducted as part of itemized deductions. Starting with the year 2013, the 7.5% threshold will increase to 10% of adjusted gross income.’
According to Tax Preparer Plus, LLC, a medically related expense will need to involve the diagnosis, cure, treatment, or prevention of a disease or health condition for you, a spouse, or a dependent. Other specialized services such as Acupuncture and massage including Nutritional IV therapy may also be deducted, which would include Chelation and Myers Cocktail treatments. Bandaids, gauze, hydrogen peroxide, aspirin, heating pads, etc., all count as medical expenses if recommended by a health care professional, just as do nutritional supplements. If your Doctor has recommended that you take nutritional supplements, you can itemize these as a medical expense.
What Qualifies as Medical Expense?
William Perez in Tax Planning Tips for Reducing Taxes Using Medical Expenses states that:
‘Over-the-counter treatments, nutritional supplements, vitamins, and first aid supplies do not qualify as tax-deductible expenses, unless those items are prescribed by a medical professional. Controlled substances (such as cocaine and marijuana) are not tax-deductible either, even if prescribed. Qualifying Medical Expenses include any expense incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. The following general types of expenses qualify:
- Costs for medical services from physicians, surgeons, dentists and other medical professionals.
- Costs for medications prescribed by a medical professional.
- Costs for Over-the-counter treatments, nutritional supplements, vitamins, and first aid supplies prescribed by a medical professional.
- Costs for medical devices, equipment and supplies prescribed by a medical professional (such as eyeglasses).
- Costs for health and dental insurance.
- Costs for long-term care and long-term care insurance.
- Transportation and lodging costs for traveling to a health care facility, including mileage for driving for medical care.’
Example of the proposed itemized deduction savings based on a 2012 tax return of a married couple filing jointly.
Let’s say the hypothetical couple has property taxes, mortgage interest, and state income taxes withheld from their W-2, all totaling $6,000. In addition, this tax paying couple has $5,000 of medical related expenses. Together, all of this adds up to $11,000 but the Federal standard deduction is $11,900, so the taxpaying couple will deduct the higher of the two amounts, $11,900 is used as the standard deduction on their return.
Now using the above proposed example, lets look at the Arizona State return. Arizona has its own “standard” deduction of $9,354 for married couples, but since Arizona allows the taxpayer to deduct medical expenses ($6000 + $5000 = $11,000), the taxpayer will deduct the $11,000 since it is higher than $9,354. Therefore the taxpayer had “itemized” deductions on their Arizona tax return but took “standard” deductions on their Federal individual tax return. The medical expenses in this example allowed the couple to deduct $11,000 instead of $9,354.
You may also want to keep track of your mileage since it can also be deducted. You can deduct 23.5 cents per mile (as of Jan 2013) for driving to your Doctor's office or pharmacy. For example if you drove a total of 1000 miles to and from your pharmacy, doctors office, dentist, or chiropractor, you would have an additional $235 of potential deductible medical expense!
Flexible Spending Accounts and Health Reimbursement Accounts
William Perez in Tax Planning Tips for Reducing Taxes Using Medical Expenses suggests other ways to save money include Flexible spending accounts:
‘Some employees may be eligible to set up a medical flexible spending account (FSA) as an employee benefit through their employer. FSA plans permit employees to save pre-tax money using payroll deductions, and then submit various medical expenses for reimbursement. Some employers offer an employee benefit called a Health reimbursement account (HRA) whereby the employer will reimburse an employee for medical expenses. Reimbursements from an HRA are tax-free. Individuals can set up a health savings account (HSA) either themselves or through a group plan with their employer. HSAs, like FSAs, are a pre-tax savings account. Unlike FSAs, health savings plans do not have a “use-it-or-lose-it” feature for accumulated savings. Health savings account holders can use their savings funds to pay for medical expenses on a tax-free basis. If you do not have a pre-tax savings plan, the Arizona itemized state deduction may save you additional money.’n
Another tip recommend by Tax Preparer Plus is to keep a credit card that is only used for medical expenses, so that it is easier to keep track of when it comes to filing. Also the more organized you are at the end of the year, the less you will have to pay in accounting fees.
Lastly, the more concerted the effort one places on his or her own health the lesser extent one will be reliant on direct health care expenditures, to ensure optimal body functioning. In most cases, nutritional supplementation is designed to be temporary and not life long. There are many factors that come into play, however when determining the individual need for vitamin and mineral supplementation. For example, a high stress job or a night shift worker who does not exercise or eat well will undoubtedly require more nutritional supplementation than the individual who regularly exercises, eats well, manages stress and has a day job.
Additional ways to save at Sunshine Health Care Center
Sunshine Health Care Center wants to see you stay well in all aspects of your life. We understand that fees-ability of services, treatments, and products plays a role in your decision making process. You are worth the investment in your health and we are honored to be a part of your wellness journey.