DEFINITION: Deductible medical expenses include amounts paid for the diagnosis, cure, relief, treatment, or prevention of disease

of the taxpayer, his or her spouse, and dependents. The status of a person as the taxpayers spouse or dependent must exist either at the time the medical services are rendered or at the time the expenses are paid. Medical expenses for children of divorced parents are deductible by the parent who pays for them Medical expenses also include payments for treatment affecting any part or function of the body, expenditures for certain medicines and drugs, expenses paid for transportation primarily for and essential to the rendition of the medical care, and payments made for medical care insurance for the taxpayer, his or her spouse, and dependents.

When Deductible For a given tax year, the taxpayer is allowed to take into account only those medical expenses actually paid during the taxable year, regardless of when the illness or injury that occasioned the expenses occurred, and regardless of the method of accounting used by the taxpayer in computing his or her taxable income. Consequently, if the medical expenses are incurred but not paid during the current tax year, the deduction for such expenses will not be allowed until the year of payment. The prepayment of medical expenses does not qualify as a current deduction unless the taxpayer is required to make the payment as a condition of receiving the medical services. For example, a taxpayers nonrefundable advance payments required as a condition for admission to a retirement home or institution for future lifetime medical care are deductible as expenses in the year paid.

Deduction Limitations The medical expense deduction was designed to provide relief for only those expenditures exceed 7.5% of the taxpayers AGI. The limitation ensures that only extraordinary medical costs will result in a deduction.

Most of the everyday type of expenditures incurred by an individual for items incident to his or her general health and hygiene are excluded from the definition of qualifying medical expense. For example, medicine and drug expenditures are deductible only if they are for insulin and prescribed drugs. Over-the-counter medicines and drugs such as aspirin, cold remedies, skin lotions, and vitamins are not deductible.

Allowable, often overlooked medical deductions

Travel expenses to and from medical treatments. The IRS evaluates the standard cents-permile allowance each year. For 2009, you can deduct eligible medical travel at 24 cents per mile. In 2010, the mileage rate deduction is 16.5 cents.

Insurance payments from already taxed income. This includes the cost of long-term care insurance, up to certain limits based on your age. Uninsured medical treatments, such as an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs. Costs of alcohol- or drug-abuse treatments can be counted on your Schedule A. Laser vision corrective surgery is a tax-allowable procedure. Medically necessary costs prescribed by a physician. That means if your doctor told you to add a humidifier to your home's heating and air conditioning system to relieve your chronic breathing problems, the device (and additional electricity costs to operate it) could be at least partially deductible.

Some medical conference costs. You can count admission and transportation expenses to the conference if it concerns a chronic illness suffered by you, your spouse or a dependent. Meals and lodging costs while at the seminar, however, are not deductible.