As the W-2 forms start rolling in after the New Year, they become your friendly reminder it’s time to start thinking about tax season. Of course, this means getting receipts and forms organized for all filers.
Most Americans only spend a handful of months thinking about their taxes. Yet, the IRS spends all year monitoring tax law from the federal government and making adjustments to the forms you need to file.
While you might need a crash course understanding tax forms for the year, the IRS has them all ready for you.
Many filers opt to itemize using the IRS Form 1040. If you look at the form you might wonder what is Schedule A Line 4?
Understanding taxes, the laws, and the forms that go with the whole process can feel daunting. Many people opt to hire help in preparing their yearly tax returns.
As you talk with your tax attorney, be sure to discuss if you have deductions that fit into Schedule A, Line 4.
Read on to learn more about these deductions.
Standard Deductions Vs Itemized Deductions
Let’s start at the beginning with understanding what a deduction is. A deduction is something you claim on your tax bill that works to lower your tax liability.
The deductible amount gets subtracted from the amount you owe in taxes overall and can reduce your tax burden.
There are two ways to claim deductibles on your taxes.
You can do standardized deductions which are preset amounts you can deduct from your tax liability based on your income, age, whether or not you are blind, and filing status and changes each year.
- Date of birth
- Your spouse’s date of birth
- Filing status
- Basic income information
- Adjusted gross income
The IRS also has some rules about who qualifies and who doesn’t to use a standardized deduction. You should check their website to know for sure if you hope to use standard deductions.
The other option you have is to use itemized deductions on your tax form. If you opt to itemize, then you list individually those things that are deductions, instead of listing reestablished amounts.
Itemized deductions include things like:
- Dollars you paid for state taxes
- Dollar paid for local income or sales taxes
- Mortgage interest
- Personal property taxes
- Real estate taxes
- Disaster losses
- Gifts to charity
- Part of the amount you paid for medical and dental expenses
The medical and dental expenses are addressed as part of Schedule A, Line 4 on the 1040 form. More to follow on this.
When Should You Opt for Itemizing Your Deductions?
You might wonder when you should use the standard deduction and when you should opt for itemizing.
The simple rule of thumb is that you opt for itemizing when you add up all your deductions and the amount is greater than the established standard deductions.
There are some times when it makes lots of sense to itemize. These include:
- Paid mortgage interest
- Paid property taxes on your home
- You have theft losses or uninsured casualty losses from a disaster that got declared a federal disaster
- Large charitable donations
- “Other Itemized Deductions” amount is large and exceeds standard deductions
Finally, you should itemize if you have large uninsured medical and dental expenses. This is where Line 4 comes in.
What Is Schedule A Line 4?
Schedule A, Lines 1 through 4 on the 1040 form are where you will itemize your medical and dental expenses.
The IRS form reminds you to not include in your itemization any medical or dental expenses paid or reimbursed by someone else. We’ll talk more about what is eligible to be included for medical and dental expenses and reimbursements shortly.
For now, let’s break down Lines 1 to 4.
Line 1 on the Schedule A 1040 Form is where you enter the total of medical and dental deductions.
Once you total up your medical and dental expenses, you want to verify you haven’t included any expenses that got paid by someone else or reimbursed to you. Those can’t be a part of your deductions.
If you paid insurance premiums for medical and dental insurance, you can also include it here. You want to be careful not to claim what an employer might have paid towards your premiums though.
If in 2021 you were an eligible trade adjustment assistant (TTA), an alternative trade adjustment assistant (ATAA), reemployment trade adjustment assistant(RTAA), or pension trade adjustment assistant (PTAA), you must first complete Form 8885 before completing Line 1. See the IRS website for more information.
Line 2 and Line 3
Line 2 is a fill-in line from another form. You should add your total amount from Form 1040 or 1040-SR, line 11 to Line 2.
Line 3 asks you to multiply line 2 by 7.5% (0.075) and fill in the box. You will use this number with Line 1 to get to Line 4.
If you don’t do Line 2, then enter a zero in both Line 2 and Line 3.
To get to Line 4, you will subtract your total on Line 3 from Line 1. Remember, you may have a zero in Line 3, so your Line 1 number is also your Line 4 number.
However, it’s also possible that when you subtract Line 3 from Line 1, your Line 3 number is greater. This means you don’t qualify for deductions and you should enter a zero in Line 4.
Standard Deductions and Line 4
Remember, if you file using standard deductions then you have set amounts you can deduct based on your individual status.
Standard Deductions for 2021 are as follows:
- Married and filing jointly, $25,900
- Qualifying widow(er), $25,900
- Head of household, $19,400
- Single or Married filing separately, $12,950
There are some additional amounts for the blind, elderly, and for education credits.
Because you’re already getting the standard deductions, you can’t itemize in Line 4 for medical and dental expenses.
Medical and Dental Claims You Can Deduct
The IRS does spell out what’s allowed to claim as a medical and dental expense and what is not allowed.
The following is allowed to be claimed as a deductible:
- Insurance premiums for medical and dental care
- Premiums for qualified long-term care insurance
If you paid any of these premiums with pre-tax money, you can’t claim them here. The IRS considers you’ve already been given the tax break for those amounts because they were excluded from your income.
If you’re a retired police officer and paid tax-free money to your retirement plan for health premiums, you also can’t deduct those.
Other Qualifying Medical and Dental Expenses
As a taxpayer, if you itemize, it makes sense to keep careful track of all medical and dental expenses. There’s a long list of things that qualify for deductions in Line 1.
These items include:
- Prescription medication
- Medical care and examinations from:
- Eye doctors
- Medical doctors
- Occupational therapists
- Osteopathic doctors
- Physical therapists
- X-ray and laboratory services, and insulin treatments
- Diagnostic tests including blood sugar tests, pregnancy tests, and full-body scan
- Nursing help, you can’t include paid housework
- Hospital care, clinical costs, and lab fees
- Long-term care services, See Publication 502 for more information
- Supplemental insurance part of Medicare
- Medicare Part D insurance premiums
- Prescription medication for nicotine withdrawal and stop-smoking programs
- Weight loss programs
- Medical treatment for alcohol and drug addiction
- Hearing aids, braces, crutches, wheelchairs, eyeglasses, contact lenses, guide dogs, and any maintenance costs
- Laser eye surgery or radial keratotomy
- Breast pumps and lactation assistance including supplies
You can also deduct lodging expenses excluding meals if it’s necessary to get medical care by a physician in a hospital or a medical care facility away from your home. There can be no element of pleasure travel connected to the expense.
Anyone who is eligible for the travel expense deduction can write off up to $50 per night in travel expenses.
You’re also able to deduct travel expenses including gas, oil, and 16 cents a mile for travel to the location for services. Parking and tolls you encounter for medical travel are also allowed to be deducted.
Finally, if you use ambulance services for any medical care or travel, your out-of-pocket expenses can also be deducted.
Medical and Dental Claims That Are Not Deductible
The IRS also explicitly spells out what cannot be included in Line 1 deductions. Remember, the IRS will want to see receipts as verification if you’re audited.
You want to only deduct what you can account for and be careful to not include any of the following:
- Cosmetic surgery (some exceptions include congenital abnormality, an injury from an accident or trauma, or a disfiguring disease)
- Diet food
- Illegal drugs or surgeries
- Nursing care for healthy babies (See Instructions for Form 2441)
- Life insurance
- Premiums from income protection policies
- Non-FDA approved drugs imported into the US
- Foreign-made versions of FDA approved drugs that aren’t approved
- Nonprescription medications except for insulin
- Travel for rest prescribed by a doctor
- Funeral, burial, or cremation costs
It also isn’t allowed to deduct the Medicare tax on wages and tips your receive. Also not allowed are Medicare tax paid as part of the self-employment tax or household employment taxes.
Medical and Dental Expenses, Whose Can Be Included?
It’s also important to know whose medical and dental expenses can be included. You consider when the services were provided OR when the bill was paid for any of the following:
- Your spouse
- Dependents that you claim as part of your return
- Bills from a child who isn’t claimed as a dependent because of IRS rules for children of separated or divorced parents (See Publication 502 for additional information)
- A person who you normally could have claimed as a dependent but they received $4,300 or more in gross income and filed a joint return
- A person who you could have claimed as dependent except the dependent was claimed on someone else’s return
Let’s say you have a parent who you helped to cover their medical or dental expenses. But this person also has income over the $4,300 benchmark and files their own taxes.
You can still claim those medical or dental expenses you paid for them as part of Line 1 expenses.
Other Line 4 Information
There are some things to know about what you can and can’t write off related to reimbursements, cafeteria plans, and independents.
You want to be careful you’re not including any expense paid by someone else like an employer contribution.
Remember too, if you were reimbursed for an expense, you can’t deduct it in Line 1.
Get the Tax Help You Need to Sort This Out
The simple truth is that this can be a little overwhelming, especially if you plan to itemize and have a long list of potential medical or dental expenses.
While getting those deductions is nice for your taxes, you don’t want to make a mistake either. If you write off the wrong thing or write off too much, you can raise the unwanted attention of the IRS.
Sure, it costs you to pay for a tax specialist to help with your taxes. But it’s money well spent if they help you avoid an audit.
Often working with a tax specialist means they can locate more deductions than you’re even aware you have.
It makes sense if your tax situation seems daunting to seek the help of experienced tax attorneys.
Itemized Medical and Dental Deductions
If you opt to do an itemized deduction on your taxes, it can be helpful to understand the answer to what is Schedule A, Line 4 deduction. These deductions can make a big difference in your bottom line tax obligation.
Get the help of qualified tax attorneys to sort out your itemized tax deductions including those from Schedule A, Line 4 for medical and dental deductions.
Contact us today to meet with one of our qualified tax attorneys today.