It’s my annual “Taxes from A to Z” series! If you’re wondering whether you can claim wardrobe expenses or whether to deduct a capital loss, you won’t want to miss it.
O is for Over-The-Counter Medications.
If you itemize your deductions on a Schedule A, Itemized Deductions (downloads as a PDF), you may be able to deduct your medical expenses.
Most taxpayers can only deduct medical expenses which exceed 10% of adjusted gross income (AGI).
Here’s a quick example of how the math works. Let’s assume your medical expenses total $5,000 and your AGI is $50,000. You cannot deduct any medical expenses since $5,000 (total expenses) less $5,000 (floor of 10% x $50,000) is zero. If, however, your expenses total $6,000, you could deduct $1,000 since $6,000 (total expenses) less $5,000 (floor of 10% x $50,000) = $1,000.
For purposes of the tax deduction, you can only claim qualifying medical expenses. Qualifying medical expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body. However, you may not deduct over-the-counter medicines (meaning those medicines or drugs that aren’t required to be prescribed). This includes aspirin, vitamins, antibiotic creams, and other over-the-counter medicines even if your doctor recommends that you purchase them. There is one exception to this rule: the purchase of insulin.
Since 2011, distributions from health flexible spending arrangements (health FSAs), health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs) are not allowed as reimbursements for the cost of over-the-counter medicines or drugs unless they are purchased with a prescription. An exception exists, again, in all cases, for insulin.
If your doctor has ordered you to take a certain over-the-counter medication, like aspirin, for a specific health condition, and you want to deduct the cost of the item or submit it for reimbursement through one of the tax-favored health plans, all is not lost. Ask your doctor for a prescription since prescription medicines are deductible and qualify for reimbursement under tax-favored health plans.
For more Taxes A to Z, check out:
- A is for Affordable Care Act Reporting
- B is for Back Pay
- C is for Canceled Debt
- D is for Dependents
- E is for Eligible Rollover Distributions
- F is for Fat Finger Error
- G is for GI Bill
- H is for Harvesting Losses
- I is for Investment Income Expense
- J is for Junk Bonds
- K is for Strike Price
- L is for Late Filing & Late Payment Penalties
- M is for Marginal Tax Rate
- N is for NSF