Hello Taxgirl! I have a question! I was married last year, and this is the first time I will be filing a joint tax return. My husband and I rent our house, and we paid about $6,000 out of pocket last year for medical expenses (this includes $2000 my husband paid for the health insurance through work). I made about $23,000 last year and my husband made about $39,000. Are we able to claim our medical expenses? Everyone is telling us since we do not own a home we cannot claim our medical expenses, or if we do we won’t get anything back because $6,000 is not enough. Can you please advise??
“Everyone” is kind of right in that taxpayers who own a home AND pay a mortgage on that home tend to be those that itemize. But it’s not a completely accurate statement. So, let me see if I can make sense of it for you.
Taxpayers have the option of claiming the standard deduction or the itemized deduction. For the tax year 2009, the standard deduction for single taxpayers or for those married filing separately is $5,700; for married taxpayers or qualifying widow(er)s, the standard deduction is $11,400; and for head of household, the standard deduction is $8,350. A majority of taxpayers will opt for the standard deduction.
If your total deductions on Schedule A exceed the standard deduction, you can claim that amount instead – these are your “itemized deductions.” The combination of mortgage interest deduction and real estate taxes tend to boost homeowners over the standard deduction amount. But those items aren’t the only expenses on a Schedule A. Also included are medical and dental expenses; taxes paid (including state and local income or sales taxes); charitable gifts; casualty and theft losses; and job expenses and miscellaneous deductions (including tax preparation fees; investment fees, safe deposit fees). You add all of those expenses together to figure your itemized deductions.
Here’s where it can get tricky: medical and dental expenses have to meet a separate threshold before you can add them into the equation. They have to total more than 7.5% of your AGI before they “count.” I don’t know how many above-the-line deductions that you guys have, but if you don’t have many, your AGI would be around your gross, or $62,000. Your medical expense floor is 7.5% of that, or $4,650. Since your medical expenses are around $6,000, you’re ahead – but can only count the overage, or $1,350. Make sure that you’ve included everything that you can deduct – including mileage for medical visits.
If you have other expenses that total about $10,000, then you’d include those medical expenses as part of your itemized deductions. This is where a mortgage makes itemizing valuable. If your average monthly mortgage interest and taxes together hover around $1,500, you’d already be over the threshold. It’s not inconceivable, but not common, to hit that threshold without the mortgage – some examples would include living in a high-income tax state; making a large purchase subject to state and local sales tax; or experiencing a casualty loss in a particular year.
If you think that you might still meet the criteria even without a mortgage, go ahead and run the numbers. If you’re using a software package – or an accountant – it shouldn’t be much effort at all to run both scenarios and see which one benefits you the most.
Remember that “everyone” isn’t in the same situation – so asking questions like this one is a good thing. Good luck!