Tax breaks are available for COVID expenses, bills
Deductions expanded for eligible teachers
Most taxpayers check the box to claim the standard tax deduction. This tax season, though, the pandemic has caused many people to want to know how they can deal with COVID -19related medical costs.
Those who had huge medical bills last year should gather up their paperwork to see if they possibly can deduct a portion of their high out-of-pocket expenses.
Or if you saw a drastic reduction in your income — and had some extraordinary medical expenses — you might be able to deduct medical expenses for 2020 when you couldn’t in the past.
Here are some tax breaks to consider:
A break for teachers
If you’re a teacher, take note. Eligible teachers now can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of the virus in the classroom.
“The teachers deduction was expanded to include expenses for PPE and related COVID expenses,” said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.
According to the Internal Revenue Service, COVID-19 personal protective equipment includes face masks, disinfectant for use against COVID-19, hand soap, hand sanitizer, disposable gloves, as well as tape, paint or chalk to guide social distancing. If a teacher had to cover the cost of Plexiglas, well, that could be used toward that deduction, too.
Many teachers know that they can claim a $250 tax break for many out-of-pocket costs. So make no mistake, the deduction isn’t new but the addition of Covid-19-related costs is useful and offers more possible ways to reach that deduction.
The coronavirus related relief was part of the Consolidated Appropriations Act, 2021, signed into law in late December — and would apply to items purchased after March 12, 2020.
Teachers can deduct up to $250 for unreimbursed business expenses for classroom materials, such as books, supplies, computers including related software and supplementary materials used in the classroom.
If both spouses are teachers, the deduction can be up to $500 on a joint return.
The tax break applies to those who teach kindergarten through grade 12. This tax break does not apply for preschool teachers or college instructors.
Teachers can claim the Educator Expense Deduction regardless of whether they take the standard deduction or itemize their tax deductions. You’d file Schedule 1 and claim the expenses on Line 10.
Claiming medical expenses
Hurdles remain high for those who want to claim their medical expenses. There is some good news, though. Taxpayers continue to have a 7.5 percent threshold on 2020 returns for medical expenses and it will be 7.5 percent again in 2021 and afterward.
“If you itemize deductions, you can deduct medical expenses to the extent they exceed 7.5 percent of your adjusted gross income,” said Alison Flores, principal tax research analyst at The Tax Institute at H&R Block.
Flores noted that deductible medical expenses include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease. After-tax medical insurance premiums are deductible, too.
“Only out-of-pocket expenses are deductible,” Flores said. “Expenses that are reimbursed or are reimbursable by your health insurance are not deductible.”
Many people would not have been able to deduct any medical expenses next year when they filed a tax return if a tougher 10 percent threshold to claim medical expenses began as planned in 2021.
But the December coronavirus relief package that passed in Washington included a measure to keep the threshold at 7.5 percent permanently.
Possible expenses
When it comes to the coronavirus, no one should be charged out of pocket to pay for the vaccines.
But consumers could face other expenses.
On the plus side, high-deductible health plans were permitted to cover testing and treatment for COVID-19 without a deductible, Luscombe said.
When it comes to testing, federal law requires health insurers to cover COVID-19 testing, the related visit, and other services related to testing, according to the Peterson Center on Healthcare and the Kaiser Family Foundation.
Even so, it’s possible some patients, including the uninsured, could receive bills for COVID-19 diagnostic testing and related services, and those bills often can be widely different from patient to patient.
Some plans denied COVID-19 testing claims or applied cost sharing for COVID-19 testing for asymptomatic individuals unless they had known or suspected that they were exposed to COVID-19 and had a referral for testing from their provider, according to a report by the Peterson Center on Healthcare and the Kaiser Family Foundation. And in some cases, some plans denied COVID-19 testing claims unless directly ordered by a physician.
The Biden administration issued new federal guidance in early 2021 that removed some barriers to testing and clarified that insurers must cover testing without cost sharing for asymptomatic individuals and without requiring medical screenings.
Patients also could still end up with out-of-pocket expenses due to deductibles and unreimbursed expenses under their health insurance plans.
If you are hospitalized for treatment related to COVID-19, H&R Block’s Flores said it’s likely all of your expenses would be deductible medical expenses. Check your insurance policy and coverage to find out what expenses were covered by your insurance.