A lot of people might not know that they have the option to deduct a portion of their medical expenses from their yearly taxes if they choose to itemize their deductions. The expenses must pass a certain threshold in order to be deducted.
This limit is based on your yearly income. For the this tax year (2012), any medical expenses that exceed 7.5% of your adjusted gross income (AGI) can be deducted. The limit is higher for those of you who are subject to the alternate minimum tax. Only medical expenses that fall under the IRS guidelines can be deducted. So make sure you double check if you are unsure something qualifies.
Let me give you an example to help straighten things out. First off, let’s say that your AGI for last year is $50,000, so 7.5% of that is $3,750. If you happened to spend $3,500 on medical expenses last year you wouldn’t be eligible to deduct any of those expenses as they do not exceed the 7.5% threshold. However, if you spent $10,000 on medical expenses last year you could deduct $6,250 of those expenses as that is the total amount of the expense over 7.5% of your AGI. Which would be some serious tax savings.
Be aware that these limits will change with the passing of the Affordable Care Act last year. Next year (tax year 2013) the threshold will be increased in to 10% of your AGI.
So what does this mean for you?
Fertility expenses, like IVF, are a covered expense as of writing this article. So if you cycled last year, or are going to cycle this year and your expenses exceed the threshold set by the IRS you can deduct those expenses from your taxes! Now this is hardly free money, but it should save you a few bucks! Another tactic you can utilize to bunch a few medical expenses together in one year to maximize your tax savings. For example, if you know you want to get laser eye surgery, but are not in any hurry to get it done, you could either get it done sooner if you already had a bunch of medical expenses this year. Or you could wait until next year in order to try to push your medical expenses over the limit for the next calender year.
Fertility treatments are expensive, and insurance coverage is spotty, so they make the perfect example of when this deduction could kick in. Especially when considering sharing risk programs that usually make the patient pay a large fee upfront (the cost of several IVF cycles). Since you paid this entire amount at one time, you would be able to claim it on your taxes , even if they treatment stretched out over until next year. If you end up getting a refund from the clinic be aware you will have to update your taxes and will owe some additional money.
Hope this helps!
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