How much can you save? When you chock tax season up to this thrifty question, it’s more like a rousing personal challenge than an annual, number-crunching nightmare. 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.
We’re asked this question a lot. 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.
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 $12,000; $18,000; and $24,000 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 2018, 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 2019, the AGI limit will have jumped up to 10% for all taxpayers (excluding retirees).
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.
Dental & Medical
The full list can be found in the , 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.
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.
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.
LASIK is a little bit trickier. While you may have LASIK performed for medical reasons—namely, to improve your nearsightedness, farsightedness, or astigmatism—it is by and large 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. These cases were from 2018. The tax rules may have changed in 2019, so you should consider consulting with a tax consultant and your eye doctor in advance to determine if LASIK surgery would be tax exempt.
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.
Vision insurance is surprisingly affordable—and tax deductible, too! Learn more about how you can enroll in a VSP Individual Vision Plan today.