Quote:
Originally Posted by Lillyth
Also, do not forget that once you spend more than 10% of your income on medical bills, the rest is tax deductible! Uncle Sam is paying for most of my surgery! We just have the outlay of cash up front. But a year from now we will get most of it back.
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I need to make clear what I told Lillyth. Tax Deductible means a reduction of income that you are reporting to the IRS. It's
not a tax credit where you get back dollar for dollar everything you spend. Think of mortgage interest. Every dollar you spend is deductible on Schedule A of your tax return. This reduces your taxable income. However, the actual dollars you get back from the government is based on your tax bracket (i.e. if you have $20,000 in mortgage interest and are in the 25% tax bracket, it's like you're getting back $5,000.00 from Uncle Sam). With respect to surgery overseas, you get to deduct medical expenses that are above 10% of your adjusted gross income. Here's an example. Say you and your husband have an AGI of $100,000 Let's say your surgery and travel costs run $40,000. This means $30,000 of this [10% of $100,000 is $10,000; $40,000 - $10,000 = $30,000] can be deducted on Schedule A and you will effectively get back $7,500 to $10,000 from Uncle Sam. My example is simplified. Most people never meet the 10% threshold unless they pay for major surgery overseas. However, once you meet this threshold, you can add every medical cost onto your Schedule A that you wouldn't bother to report normally (every doctor copay, every prescription drug copay, any mental health provider, acupuncturist, massage therapist, or medical expense not reimbursed by insurance, and any other elective surgery that is not considered cosmetic). This could make it so that your surgery is effectively covered 40% by Uncle Sam. Sorry if I may have mislead you Lillyth. However, you will most likely get a very large tax refund next year (just not dollar for dollar what you spend overseas).