When it comes to the IRS, sometimes it is more sensible to start things at the end. If you are filing a Schedule A, figure 7.5% of your gross income before you tally your medical bills. You may be able to see at a glance if they are worth adding up at all.

The health medical deduction comes after you have paid out-of-pocket, unreimbursed 7.5% of your gross income. This can be a lot of money. If you eared 25,000 last year, you would have to pay $1875 before you could claim a medical deduction. If you earned
$100,000 that amount would be $7500. If you know your medical expenses were not anywhere near 7.5%, do not bother calculating them.

You need to know whose expenses you can claim. Medical costs for you, your spouse and your dependents are deductible. They have to have been your spouse or dependent at the time the bill was incurred or at the time the bill was paid.

For instance, Bill visited an emergency room in 2006 and incurred a bill of $800. Bill and Mary divorced in April, 2007. Mary paid Bill's hospital bill in July, 2007. Mary can deduct the payment because they were married when Bill received the treatment.

Conversely, Heidi and John were divorced in 2005. Heidi claims their twelve year old daughter, Sandy, as a dependent. In 2007, John paid $1600 to Sandy's orthodontist. John cannot claim these expenses because Sandy was not his dependent at the time of the treatment nor when the bill was paid.

The next step is to know exactly what can be deducted. There is a list of items that can and cannot be included as medical expenses in IRS publication 17.

A major expense is health insurance. Amounts you paid for health insurance is figured in your deductible allowance. This does not include amounts paid by money that was not taxed. It also does not include any amounts an employer paid for health insurance. Premiums paid for Medicare B and D are considered deductible expenses. Self-employed people may be able to deduct 100% of their insurance costs.

If an employer provides the option of a high deductible health plan, the employees may be eligible to open health savings accounts. If the employer pays the premium for the HDHP, that amount is not deductible. If the employee pays the premium. it is. Amounts contributed to the health savings account are deducted from the gross income on form 1040. They can not be used again as a medical deduction. IRS Publication 969 discusses the tax consequences of health spending

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