In order to deduct medical expenses you must itemize and very few people actually itemize. There are certain dollar amounts that must be met in order to deduct medical expenses. You may only deduct medical expenses if they have exceeded 7.5% of your adjusted gross income (AGI). Then you may deduct anything above this amount.
For example: If you earn $75,000 per year, your medical expenses must be more than $5,625.00 for that year
A flexible spending account is a great way to pay medical bills tax free. This is an option that can be set up through your employer. It will allow you to set money aside each week out of your salary for medical expenses. Each company will vary with the amount they will allow you to contribute to your FSA. This money will come out of your earnings tax free and set up in a separate account strictly to pay medical bills. This money will not be taxed by social security or as income.
An IRA or a 401(k) plan is also an option to pay medical expenses at a reduced tax rate. This is not the best option but if you are ever forced to cash in some of your savings you will not have to pay as much in penalties for cashing out some of your retirement early. In order for the penalties to be waived you must once again meet the 7.5% gross income threshold.
Please visit TurboTax Online to learn more about medical expense deductions. TurboTax online offers free tax calculatorsand other helpful information for maximizing your tax deductions.