<p>I don’t have an accountant and I’m just trying to get a broad answer (I tried googling but the laws are complicated and I don’t quite understand tax lingo). </p>
<p>My medical bills have started rolling in (yippie). I have the option of either paying them off this year and wiping out 2/3 of my savings or switching to a payment plan and slowly paying them off over the next year. If I did the payment plan, I would probably pay off the bulk of the bills with my tax refund (from my jobs) early next year. </p>
<p>For tax purposes, I know that tax forms ask you for any uncovered medical expenses. I’ve never put information in that section because my medical bills have always been pretty low in the past. However, my surgery ended up costing about 1/4 of my pre-tax income for this year. What, if any, tax benefits can you get for out of pocket medical costs? I am not, in any way, expecting any kind of refund off of this, but if it’s there, I would like to catch a financial break if possible lol. Getting a surprise major surgery right after quitting my jobs for grad school was not in the plan! lol </p>
<p>I am COMPLETELY clueless when it comes to taxes. I use TurboTax and my taxes take about 20 minutes every year lol. I know there are some tax experts on here and I love free advice </p>
<p>I would need more information to answer your question which I don’t you should share in a public forum. </p>
<p>This is what I would recommend that you do. Look up the accounting department in your school and email the tax professor. Most schools have their junior/senior students volunteer time during tax season to help people with their taxes, and honestly if you explain your situation I wouldn’t be surprised if the professor would want to help you themselves. I know I would.</p>
<p>Beginning this year, you can deduct medical expenses that exceed 10% of your AGI (adjusted gross income) previously it was 7.5% for the deductibility threshold. </p>
<p>For most people, this means that medical expenses are not deductible. But if you are in a student situation with low AGI, they could be. It’s possibly worthwhile thinking about what your 2013 AGI is going to look like vs next years if you’re considering spreading out the bill. Spreading it out might mean that you never get to the deductible threshold. </p>
<p>But, …deductibility may not be that big a deal. Depending on your tax rate, it might be better to forget about deductibility (if its available at all) and just schedule the payments in the most prudent way.</p>
<p>Make a copy of your 2012 TurboTax return. Change up the stuff you think will be different for 2013. See what changes in the actual return. Won’t be accurate, but for most people, will give you a general idea of whether you’d benefit from the medical deduction.</p>
<p>allyphoes advice is very good. Simply go to your old turbotax file, click on the file “Save As” button and give it a new name like “hypothetical med expense”, and save it. Then you’ll have the original and a new file with the funny name that you can change to see what the effect was. Except for the fact that the deductibility threshold changed from 2012 to 2013, which is hardwired(programmed) into the program.</p>
<p>A different way to do it is to go to dinkytown.net and use their 2013 tax estimator. Its updated for the new tax environment, including the tax on investment income and the changes in the tax brackets. Its pretty easy to use.</p>
<p>My basic understanding (and PLEASE correct me if I am wrong) is that you qualify for a medical deduction if (1) you file a Schedule A; and (2) you have out-of-pocket medical expenses that you paid that year that exceed 10% of your adjusted gross income.</p>
<p>So let’s say that your AGI is $30,000. If you paid $5,000 in medical bills, you could deduct $2,000 of that:
$30,000 x 10% = $3,000
$5,000 - $3,000 = $2,000.</p>
<p>My understanding - and correct me if I am wrong - is that you can deduct expenses incurred in 2013 that are paid in 2014. Those expenses must exceed 10% of your AGI.</p>
<p>So, the big issues:
Would any eligible expenses on Schedule A, plus your medical expenses in excess of 10% of your AGI, ever exceed the Standard Deduction (i.e. $6,100)? In my example above, it only makes sense to take the medical deduction if you have at least another $4,100 in deductible expenses.</p>
<ol>
<li>If so, are you near any of the marginal tax rate thresholds in either 2013 or 2014, such that taking the deduction in one year would benefit you more? (For example, if your highest marginal tax rate in 2014 is higher than your marginal tax rate in 2013, then you might prefer to have 2014 deductions.)</li>
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<p>Those are just my thoughts, but I’m not a tax professional.</p>
<p>The above posts are correct. Medical expenses are irrelevant if the total of itemized deductions is not greater than the standard deduction, which is $6100 for single for 2013; $12200 for married filing joint. Medical expenses are only one of the itemized deductions. Only the medical expenses greater than 10% of adjusted gross income will count. Medical expenses count when they are paid, not incurred.</p>
<p>However, putting them on a credit card is considered paid, even if you don’t pay the balance in its entirety by the end of the year. So, if you have a credit card with zero interest rate for 6 or 12 months - that is something worth considering (if you also have other itemized deductions).</p>
<p>So if it’s higher than 10% of my income, but lower than the standard deduction, it’s kind of a moot point… am I correct? </p>
<p>My income in 2014 will be MUCH lower than 2013 but I’ll still be in the same tax bracket. </p>
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<p>Oh hadn’t thought of that. One of my credit cards is still in the promotional no-interest phase and will be until I can pay it off through work.</p>
<p>Almost correct. You can deduct your state income tax (I think you are from the state with income tax) on schedule A and probably part of your vehicle tabs.</p>
<p>I assume you don’t have mortgage or property tax deduction, but if you do - that would work.</p>
<p>Ok, thanks everyone! I was really just curious. I think I’m just going to pay it off, get it out of the way, and any benefits are just icing on the cake. I don’t want it hanging over my head.</p>
<p>Don’t forget to keep track of travel expenses/mileage for medical care; it is also deductible. It’ll just be easier now if you start some sort of record keeping vs. trying to go back and remember/figure it out come next year.</p>
<p>It depends on if you have other itemized deductions that, with the additional itemized deduction for the medical expenses, would put you over the standard deduction. Check 1040 schedule A to see what kind of deductions there are.</p>
<p>Here is the link to the IRS instructions for 1040 Schedule A. I recommend reading the medical deductions so you get a good idea of what kind of things you need to keep track of. It is good for curing insomnia as well.</p>
<p>The haven’t released the one for 2013 yet so you will see the wrong rate being mentioned, but the types of things that can be deducted is still relevant.</p>
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