After receiving a cancer diagnosis, a patient may wonder about the financial responsibility that will accompany it. Most insurance plans will cover some of the bills, but cancer patients may have additional expenses that they pay for. Fortunately, cancer patients may also be able to deduct some of their out-of-pocket costs giving them substantial tax break on their taxes.
Are You Eligible for a Cancer-Related Tax Deduction?
Taxpayers who are are able to itemize their tax deductions instead of claiming the standard deduction may be able to deduct their medical expenses like ones related to diagnosis, regular care, medication, and hospital stays if the expenses are more than 7.5% of adjusted gross income.
Taxpayers can also deduct medical-related travel like mileage to drive to appointments at 20 cents per mile as well as costs for any seminars attended related to education about diagnosis.
Self-employed taxpayers don’t have to itemize their deductions in order to deduct their health insurance premiums. They can deduct their self-employed health insurance premiums as a deduction to their income.
What You Need to Do?
Tax deductible medical expenses are defined in the IRS Code as “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.” Treatments, ranging from chemotherapy and radiation to surgery, are expensive and your policy arrangement will have an effect on how much of your treatment will be covered. For rare cancers that require specialized care, including mesothelioma, travel is often necessary and the cost of travel may be tax deductible.
The IRS provides a comprehensive list of costs that qualify, including health insurance premiums not paid with pre-tax dollars. It’s important to note, you may pay for care by cash, credit card or personal check during the tax year in which the tax deduction is being considered.
When it comes time to file, itemized tax deductions such as medical expenses, mortgage interest, state and property taxes and charitable contributions, must exceed the increased “standard deduction” ($12,000 single, $24,000 married filing jointly) allowed by the IRS.
If you are able to itemize your tax deductions, your medical costs must exceed 7.5% of Adjusted Gross Income (AGI) and in 2019, the threshold goes back to 10% AGI. In 2018, someone whose AGI is $50,000 would be able to deduct out-of-pocket medical expenses if they exceed $3,750 ($50,000 x 7.5%). TurboTax will automatically figure out whether you benefit from claiming itemized tax deductions or claiming the standard deduction.
Don’t worry about knowing all these tax laws. TurboTax will ask simple questions and give you the tax deductions and credits you’re eligible for based on your answers.