Unreimbursed Medical Expense

• Unreimbursed medical expenses ABOVE 7.5% of Adjusted Gross Income
• You won't need to do the math, just the 7.5%

MR. WATSON: What is an unreimbursed medical expense? It's a medical expense that you incurred and you were not reimbursed by insurance or otherwise.

• Prescription drugs,
• insulin,
• hospital expenses,
• physician expenses,
• nursing care,
• dental care,
• rehabilitative treatments,
• medical insurance premiums (including long-term care insurance premiums).

MR. WATSON: Let's say you had gross income of $50,000. And through some tax deductions you were able to get your taxable income down to $35,000, that's called, adjusted gross income. Y'all with me?

ALL: Yes.

MR. WATSON: If you add up all your unreimbursed medical expenses, your taxicab rides to your doctor, the insulin that was not paid for by insurance, the 20 percent of an 80/20 plan that you had to pay, anything that the insurance company turned down-if you add it all up, any amount that exceeds 7.5% of your adjusted gross income, any amount that exceeds that, you can take a tax deduction.

MR. WATSON: Let's say I had $10,000 of unreimbursed medical expenses. First of all, we have to know what our limit is. I made $50,000, and have an adjusted gross income of $35,000. What is 7.5% of $35,000? $2,625. Anything above $2,625 is tax deductible. How much do I have? $10,000. How much can I deduct? $7,375. Do y'all agree? Anything that exceeds 7.5 percent of your adjusted gross income.

 

MR. WATSON: Down the road, if my insurance company finally pays the expenses, reimburses me, I have to reclaim what I deducted.

MR. WATSON: I must reclaim only the amount of money that I took a tax deduction on, which is how much?

WOMAN: $6,500.

MR. WATSON: It would no longer be a unreimbursed medical expenses, so I have to reclaim that.

WOMAN: So you have to reclaim the $7,375.

MR. WATSON: Right.

MAN: Or re-adjust your income tax return.

MR. WATSON: Right. Point is, that $7,375 what I'm claiming. So I can deduct anything above what? 10 percent. Don't worry about the math. All you have to worry about is 7.5 percent. I promise you will not forget it.

MR. WATSON: And to top it all off...Self employed individuals are allowed to tax deduct their health insurance premiums.

MR. WATSON: Benefits received by an insured under a medical expense policy are not included in his gross income since they are paid to offset your losses. This just means if you have a policy that pays you while you are sick and can not work, you will not be taxed on it.