Tax return

[Afbanda]

I've been paying out of pocket for high deductible medical expenses. Can i claim them (braces, physical therapy, prescriptions, dermatology, dr visits?) Can i claim the out of pocket expense for medical weightloss clinic where i see a physician assistant and am prescribed weightloss meds? 

If I don't have each individual reciept, can i use copies of my bank statement as proof of the out of pocket cost for prescriptions, etc.? 

My job offers discounted tuition. Once i surpass $5280 per academic year, they will begin charging me taxes on the credit hours I enroll in. They mentioned that it will look like I received a $3000 bonus on my taxes. And the university will be taking a percentage of my check to cover taxes, i think. Will this cause me to owe on my taxes? Will it drastically lower my income tax return?

Fyi, last year my annual income was about 35,000 and I have 4 dependents. I am also head of household. 

Thank you so much for your time and i appreciate any advice i can get on this! 

[KimberW]

The expenses that you list (braces, physical therapy, prescriptions, etc.) are generally considered deductible medical expenses if they haven't been reimbursed by insurance or funds from a Health Savings Account or Flex Spending Account. Some weight loss expenses count. Others don't. You can find more details in the IRS's Publication 502: Medical and Dental Expenses.

But ... medical expenses are only deductible to the extent that they exceed 7.5% of your adjusted gross income. If you earn $40,000 and have no other adjustments, this means that the first $3,000 of medical expenses don't count at all.

And another but ... medical expenses are deducted on Schedule A Itemized Deductions. If you file Head of Household, your standard deduction without adding up any receipts at all is $21,900 for 2024. Unless your itemizable deductions add up to more than that, you're better off using the standard deduction.

These two restrictions mean that medical expenses don't end up being useful on your federal tax return -- even if they are technically deductible.

(Your state may have different rules for deducting medical expenses. Or your state's standard deduction may be quite a lot lower than the federal.)

For your tuition benefit -- the IRS says that the first $5,250 of tuition assistance is tax free and is excluded from your wages. Any amount more than that, though, is considered wages and will be taxed the same way. For instance, assume that your normal wages are $40,000 and you get tuition assistance for $7,250. You will be taxed on a total wage amount of $42,000. [$40,000 wages + $7,250 tuition assistance - $5.250 excludable]

That amount could impact your refund at the end of the year, or could just result in a couple of much lower paychecks when they take out the extra withholding from your check to cover the additional tuition. How they handle the scheduling of this would be something to check with your HR department or your manager.

If you want to see what kind of impact the extra income will have on your refund, you can use the TurboTax W-4 Calculator or the IRS Tax Withholding Estimator. Both of these tools will ask you for information from your most recent pay stubs (to get year-to-date information) as well as what you expect to happen with your paychecks for the rest of the year. They will give you an idea of what your expected refund (or balance due) would be and can provide updated W-4s to make changes if you want.