If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction.
1. You must itemize. You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.
2. Deduction is limited. You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.
3. Expenses paid in 2012. You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.
4. Qualifying expenses. You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.
5. Costs to include. You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.
6. Travel is included. You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.
7. No double benefit. Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.
You'll find more information in IRS Publication 502, Medical and Dental Expenses. Also see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. They are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
Take Credit for Your Retirement
Saving for your retirement can make you eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement plan, such as a 401(k) or to an IRA, you may be eligible for the Saver's Credit.
Here are seven points the IRS would like you to know about the Saver's Credit:
1. The Saver's Credit is formally known as the Retirement Savings Contribution Credit. The credit can be worth up to $2,000 for married couples filing a joint return or $1,000 for single taxpayers.
2. Your filing status and the amount of your income affect whether you are eligible for the credit. You may be eligible for the credit on your 2012 tax return if your filing status and income are:
Single, married filing separately or qualifying widow or widower, with income up to $28,750
Head of Household with income up to $43,125
Married Filing Jointly, with income up to $57,500
3. You must be at least 18 years of age to be eligible. You also cannot have been a full-time student in 2012 nor claimed as a dependent on someone else's tax return.
4. You must contribute to a qualified retirement plan by the due date of your tax return in order to claim the credit. The due date for most people is April 15.
5. The Saver's Credit reduces the tax you owe.
6. Use IRS Form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. Be sure to attach the form to your federal tax return. If you use IRS e-file the software will do this for you.
7. Depending on your income, you may be eligible for other tax benefits if you contribute to a retirement plan. For example, you may be able to deduct all or part of your contributions to a traditional IRA.
For more information on the Saver's Credit, see IRS Publication 590, Individual Retirement Arrangements. Also see Publication 4703, Retirement Savings Contributions Credit, and Form 8880. They are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).