Are Your COVID Tests Tax Deductible?

Navigating tax deductions for healthcare expenses can be complex. This article clarifies the conditions under which COVID-19 testing expenses can be deducted from federal income taxes.

General Medical Expense Deductions

The Internal Revenue Service (IRS) allows taxpayers to deduct qualified medical expenses that exceed a certain percentage of their Adjusted Gross Income (AGI). Deductible medical expenses are payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body. This definition includes costs for medical services, equipment, supplies, and diagnostic devices.

For the current tax year, you can deduct only the amount of your medical and dental expenses that is more than 7.5% of your AGI. For example, if your AGI is $50,000, only medical expenses exceeding $3,750 are potentially deductible. To claim these deductions, you must itemize deductions on Schedule A (Form 1040) rather than taking the standard deduction.

Deducting COVID Test Costs

Amounts paid for COVID-19 tests are considered eligible medical care expenses under tax law. This includes costs for at-home test kits purchased directly by the individual, as well as payments for tests administered by a healthcare provider or laboratory.

However, the deductibility of these costs depends on whether they were reimbursed. Only out-of-pocket expenses not reimbursed by health insurance, an employer, or a government program can be included in your medical expense deduction. For instance, if an employer or a public health initiative provided a test for free, there is no cost incurred by the individual, and therefore, no deductible expense.

How to Claim Your Deduction

To claim medical expense deductions, including those for COVID-19 tests, you must itemize your deductions on Schedule A (Form 1040). This form is used to report various itemized deductions, with medical and dental expenses listed in a specific section. You will total all your qualifying medical expenses for the tax year and enter the amount on the appropriate line of Schedule A.

Accurate records are essential for substantiating your medical expense deductions. You should keep all receipts for purchased test kits, invoices from healthcare providers, and any Explanation of Benefits (EOB) statements from your insurance company. These documents serve as proof of payment and demonstrate that the expenses were not reimbursed. While these records are not submitted with your tax return, they must be readily available in case the IRS has inquiries about your claimed deductions.