Are Medical Expenses Tax Deductible? What You Need to Know

When tax season rolls around, one of the most common questions people ask is whether their medical expenses are tax deductible. Medical costs can add up quickly, and knowing what you can deduct can provide significant relief. Let's dive into the key considerations for deducting medical expenses, especially if you're self-employed, and how it can benefit residents of Texas and New Mexico.

What Medical Expenses Are Tax Deductible?

According to the IRS, medical expenses can be deducted if they exceed 7.5% of your adjusted gross income (AGI). This includes costs for diagnosis, treatment, prevention, or alleviation of a physical or mental defect or illness. Here's a breakdown of what's typically deductible:

• Payments for doctors, surgeons, and specialists.

• Prescription medications and insulin.

• Medical devices like wheelchairs or hearing aids.

• Long-term care services and insurance premiums for policies that provide medical care.

• Dental and eye care.

What Medical Expenses Are Not Tax Deductible?

Not all health-related expenses can be deducted. The IRS does not allow deductions for:

• Over-the-counter medicines (except insulin).

• Cosmetic surgery (unless it improves function or addresses a deformity).

• General health items such as toothpaste, toiletries, or vitamins.

Understanding what qualifies as a medical deduction helps ensure you're getting the most out of your tax return without any surprises.

Are Medical Expenses Deductible for the Self-Employed?

For those who are self-employed, health insurance premiums can be a significant portion of your annual medical expenses. The good news is that if you pay for your own health insurance, you may be eligible for a deduction on your premiums, even if you don’t itemize deductions. This deduction applies to both health and dental insurance premiums, and it's an "above the line" deduction, meaning it directly reduces your taxable income.

How to Deduct Medical Expenses in Texas and New Mexico

In both Texas and New Mexico, the process for deducting medical expenses follows federal IRS guidelines. However, since Texas has no state income tax, you'll only focus on federal deductions. In New Mexico, state tax laws generally align with federal rules, but it's still wise to consult with a tax advisor for specific state-related guidance.

Are Medical Expenses Exempt from Gift Tax?

A lesser-known tax benefit comes into play when considering how you can financially help others with their medical costs. Payments you make directly to a healthcare provider on behalf of someone else are not subject to gift tax limits. This is particularly useful for families who may want to help aging parents or other loved ones with significant medical expenses.

How The Baylon Agency Can Help You Prepare

Medical expenses, insurance premiums, and healthcare costs are often overwhelming, especially when it comes to balancing those with tax considerations. That's where The Baylon Agency comes in. Based in El Paso, we specialize in health and life insurance solutions tailored to your unique needs in both Texas and New Mexico. Whether you're self-employed, planning for a family's future, or seeking coverage that fits within your budget, we’re here to guide you.

Health insurance premiums are one of the most commonly deductible medical expenses, and making sure you have the right coverage can help you maximize your deductions. At The Baylon Agency, we offer a wide range of insurance options, from individual health plans to family and life insurance policies.

For example, if you're self-employed, choosing the right health insurance plan can make a big difference in your out-of-pocket expenses, both now and at tax time. And for families with young children or aging parents, life insurance policies can help provide security for the future and potential tax advantages.

Secure Your Financial Future

As you navigate the complexities of medical expenses and tax deductions, don’t hesitate to seek advice. Ensuring you're covered with the right health or life insurance policy is one way to secure your financial future, and at The Baylon Agency, we’re committed to helping you every step of the way.

Whether you’re looking to update your current insurance plan, explore new options, or just have questions, reach out for a free policy review today. Let us help you protect your health and wealth while also giving you the tools to maximize your tax deductions.