Hearing aids are generally tax deductible, but there are some IRS rules you need to know.
How are hearing aids tax deductible?
The IRS classifies hearing aids as a medical expense falling under the medical and dental expenses tax deduction.
In order to deduct your hearing aids, you generally need to itemize your tax deductions and spend a certain amount based on your Adjusted Gross Income. This is easy to do if you use tax filing software.
How do deductible medical expenses work?
As a general rule, you can deduct your medical expenses as an itemized deduction to the extent that you spend more than 7.5% of your Adjusted Gross Income during the year.
So if your AGI is $100,000 per year, you can typically deduct anything over $7,500. For example, if you spend $8,000 during the year, you can deduct $500.
The deduction is for your combined medical expenses. This can include hearing aids, hearing aid batteries, medical treatment related to hearing loss, and medical or dental care for other health issues. All of your eligible expenses during the year get added together to determine what you can deduct.
How do expenses covered by health insurance work?
One important thing to note is that the deduction is only for your out-of-pocket expenses. You can’t deduct the part of your expenses that was covered by health insurance or count it for meeting the 7.5% of AGI threshold.
You can generally deduct your deductible and any expenses not covered by insurance.
Health Insurance Premiums
While you can’t deduct things covered by insurance, you may be able to include your insurance premiums in your deductible expenses. To qualify, you generally need to pay your premiums out-of-pocket and not qualify for other tax benefits.
For example, you generally can’t deduct premiums that you took the self-employed health insurance deduction for. You also generally can’t deduct premiums paid by an employer or pension plan that weren’t included in your taxable income.
Late Health Insurance Reimbursements
If you have to pay medical expenses out-of-pocket and insurance doesn’t reimburse you until later in the same year, you can’t take a tax deduction for those expenses. The purpose of the deduction is to allow you to deduct expenses you never get paid back for.
If you pay out-of-pocket and insurance reimburses you in a later year, you’ll need to include the reimbursement amount as income. For example, you deduct $1,000 in year 1 because insurance didn’t pay your claim then in year 2 the insurance company pays you the $1,000. Since you took the deduction in year 1, you have to claim the $1,000 as income in year 2.
Only the amount you deducted counts as income. So if your Adjusted Gross Income was $100,000, you had $8,000 in qualified medical expenses in year 1, and got paid $8,000 in year 2, you only have to report $500 as income in year 2. The reason is that in year 1, you couldn’t deduct the amount up to 7.5% of your AGI ($7,500).
What if you pay for hearing aids from a health savings account?
You also generally can’t receive the medical expenses deduction for expenses you paid from your HSA. The reason is that you already took a tax deduction for that money when you contributed to your HSA.
As a reminder, qualified distributions from your HSA are not taxable income.
What if you claim a business expense deduction?
If you’re self-employed and purchase business equipment or services to assist you with your hearing loss while working, you may be eligible to claim a business deduction.
If you do take a business deduction, you can’t also claim a medical expenses deduction for the same expenses. Like health insurance, your business deductions amount also won’t count towards the 7.5% of AGI minimum.