How much can you save? At the end of the day, paying less taxes means more money in your pocket, and everybody can get excited about that. So which parts of your vision insurance and medical expenses actually qualify for tax deductions? Probably more than you think. But tax law is complicated and ever-changing. So these tips are intended to help you be informed, not to advise you or take the place of a qualified tax expert.
Are vision insurance premiums tax deductible?
In some states vision insurance is filed as an insurance product and in other states it is not. Individually paid "health" insurance premiums would likely be tax dedutible. Check with your state's tax laws to determine how they regulate vision insurance plan premiums.
Medical Expenses Must Exceed 7.5% of Your AGI
Your adjusted gross income (AGI) is your income after it has been adjusted for deductions like student loan interest, child support payments, and contributions to your independent retirement account (IRA). The IRS requires that your itemized deductions must first exceed 7.5% of your AGI, before the expenses are deducted.
Let’s say you make $40,000 per year, after accounting for the relevant adjustments mentioned above. To find out how much you would need in medical expenses to claim deductions, you would multiply that $40,000 by 0.075 (7.5%). This results in $3,000. That means if you had $5,000 in medical expenses this year (including trips to the eye doctor that were paid by you), then you could claim $2,000 as your deductible ($5,000 - $3,000).
If this value exceeds the standard deduction, then it would make sense to itemize your deductions. Since the standard deduction is $12,550 and $25,100 for single taxpayers, head of household taxpayers, and married filing joint returns respectively, medical expenses alone are oftentimes not enough to justify making the switch to an itemized deduction. But if you were hospitalized, had major surgeries, receive ongoing treatments for a chronic condition, or covered the cumulative costs of a household in 2021, then it may be the best way to file.
Other itemized deductions will also help bring you above the AGI percentage and standard deduction. Theft and casualty losses, state and local taxes, home mortgage interest (usually, the most significant if you are a homeowner), and charitable contributions all also qualify.
Be aware that next year when you’re filing your taxes for 2021, the AGI limit may change all taxpayers (excluding retirees).
Types of Vision Care, Dental Care, and Medical Expenses That Are Tax Deductible
To make things a little easier for you, here is a non-exhaustive list of vision, dental, and medical products, services, and expenses that are all considered deductible by the IRS.
- Payment of fees to eye doctors and optometrists
- Reading or prescription eyeglasses
- Contact lenses and all products to help maintain them (cases, cleaning solution, etc.)
- Eye exams, including copays
- Vision insurance premiums paid by you as an individual, in some states
Dental & Medical
- Payment of fees to dentists
- False teeth
- Payment of fees to doctors, surgeons, psychiatrists, and all other medical professionals
- Hospitalization for medical reasons
- Addiction treatment
- Medical testing
- Fertility treatments
The full list can be found here, but it is important to note that the IRS does not limit its definitions to the ones listed; many other expenses may also qualify, depending on the purpose of the expense.
Expenses to Leave Out of Your Itemization
While it is exciting to realize the full extent that your vision, dental, and other medical expenses might qualify for tax deductions, it is also just as important to be very clear where the IRS draws the line, and which products and services do not qualify for deduction. Again, here is a non-exhaustive list for you to reference and gain an understanding as to what the IRS does not consider a “medical expense” for tax purposes.
- Funeral and burial expenses
- Non-prescription medicines (excluding insulin)
- Teeth whitening
- Activities your doctor recommends to improve your general health, such as taking a trip or a new social hobby
- Illegal treatments or substances
- Nutritional supplements
- Toothpaste and other toiletries
- Non-prescription smoking cessation products (nicotine patches and gum)
- Cosmetics and elective cosmetic surgery
Simply approach your deduction items with a practical mindset, good intentions, an IRS reference document, and potentially a tax consultant to avoid any unnecessary auditing in the future.
What about LASIK surgery?
While you may have LASIK performed for medical reasons—namely, to improve your nearsightedness, farsightedness, or astigmatism—it is considered an elective surgery. There have been a number of cases, where individuals have claimed their laser surgery as a deductible item, especially when it was not covered by their vision insurance.
Ultimately, reducing your taxes is as easy as listing items 1, 2, 3…and so on, until you surpass the sum of the standard deduction category that you are in. If you’re ever uncertain, refer back to the IRS 502 Publication mentioned above, or even hire a tax consultant. They will be able to illuminate the most troublesome of tax categorization problems, and likely save you the most on your taxes.
Learn More About Vision Insurance
Vision insurance is surprisingly affordable—and potentially tax deductible*, too! Learn more about how you can enroll in a VSP Individual Vision Plan today.