Why you may want to incur medical expenses before year end

Tuesday, 18 September, 2012

Currently, if your eligible medical expenses exceed 7.5% of your adjusted gross income (AGI), you can deduct the excess amount. But in 2013, the 2010 health care act increases this “floor” to 10% for taxpayers under age 65.

Eligible expenses can include health insurance premiums, medical and dental services and prescription drugs. Expenses that are reimbursed (or reimbursable) by insurance or paid through a tax-advantaged health care account (such as a Flexible Spending Account or a Health Savings Account) aren’teligible.

To potentially be able to deduct more health care costs, consider “bunching” nonurgent medical procedures and other controllable expenses into alternating years. For example, if your year-to-date medical expenses already exceed 7.5% of your projected 2012 AGI and you’re anticipating elective surgery or major dental work in early 2013, you could instead schedule it for this year. Or you could stock up on prescription meds (to the extent allowed) and buy new contact lenses or glasses before year end.

Bunching expenses into 2012 may be especially beneficial because of the scheduled floor increase. But keep in mind that, for alternative minimum tax purposes, the 10% floor already applies. Also, if tax rates go up in 2013 as scheduled, your deductions might be more powerful then. Finally, be aware that the floor increase could be repealed by Congress.

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The blogs were developed with the understanding that Steiner & Wald,  CPAs, LLC is not rendering legal, accounting or other professional advice or opinions on specific facts or matters and recommends you consult a professional attorney, accountant, tax professional, financial advisor or other appropriate industry professional.  These blogs reflect the tax law in effect as of the date the blogs were written.  Some material may be affected by changes in the laws or in the interpretation of such laws.  Therefore, the services of a legal or tax advisor should be sought before implementing any ideas contained in these blogs.  Feel free to contact us should you wish to discuss any of these blogs in more specific detail.