The IRS allows you to claim expenses associated with a diabetic condition, but the costs aren't fully deductible. Deducting medications and supplies comes with a whole host of rules you must follow when filing your tax return. If your expenses are significant enough, however, going to the trouble may be worth your while.
Qualifying Medical Expenses
Deductible medical expenses for diabetes include a wide range of needs, including doctor visits, hospitalization, insulin, test kits to check your blood sugar, or even a weight loss program if your doctor orders it. Deductible medication costs are typically limited to those prescribed by your doctor, not over-the-counter medicines, but insulin is an exception. You can deduct this cost even if your insulin isn't prescribed.
If you have health insurance coverage, it will cover some of the cost of your medication and supplies. You can't deduct this portion paid for by your insurance. For example, if your policy covers $60 of a $100 medication, you can only deduct $40. The good news is that your insurance premiums are deductible as well, assuming you're the one paying them. You can't deduct any portion that someone else pays for, such as your employer, unless your employer enters them on your W-2 as compensation for the work you perform.
Itemizing Vs. Standard Deduction
You can only claim the costs of medication and supplies if you itemize deductions on your tax return. This means forgoing the standard deduction, which is $5,950 in 2012 if you’re single, $8,700 if you're head of household, or $11,900 if you're married and you and your spouse file a joint married return. If your itemized deductions amount to more than the standard deduction for which you qualify, you should itemize and deduct your medical expenses. Otherwise, you're better off taking the standard deduction. You can itemize other expenses in addition to your medical costs, however, so when you include these, your overall itemized deductions might exceed your standard deduction. Other common deductible expenses include mortgage interest, taxes and charitable contributions.
Calculating Your Deduction
Unfortunately, not all your medical expenses and insurance premiums are deductible. You can only claim the portion that exceeds 7.5 percent of your adjusted gross income. If your AGI is $65,000, you can deduct medical expenses that exceed $4,875, or 7.5 percent of that number. Using this same example, if your total premiums and unreimbursed costs were $8,000, your deduction would be $3,125. You'd have to complete and file Schedule A with your tax return to claim this and other allowable itemized deductions, and you must use Form 1040, not Form 1040A or 1040EZ, to file.
Beverly Bird has been writing professionally since 1983. She is the author of several novels including the bestselling "Comes the Rain" and "With Every Breath." Bird also has extensive experience as a paralegal, primarily in the areas of divorce and family law, bankruptcy and estate law. She covers many legal topics in her articles.