Even with a good insurance plan, you might still shell out money for the co-pays on your prescriptions. If so, some or all of these expenses could be deductible. However, the Internal Revenue Service puts limits on when you can claim the deduction and how much you can write off.
Prescription drug co-pays count as a qualified expense for the medical and dental expenses deduction. According to IRS Publication 502, if it's prescribed a doctor, it's a qualified expense. However, you can only ask for the deduction if you paid for it yourself and were not reimbursed. The deduction also has to be done in the year you paid for the prescriptions, even if you don't take all or a portion of the medication until a future year.
Your prescription co-pays fall under the umbrella of the medical expenses deduction. This means you can only write off the portion of your expenses that exceed a certain percentage of your adjusted gross income. You can't deduct any expenses under the cutoff. In 2012, the cutoff was set at 7.5 percent. For example, if you had an adjusted gross income of $60,000, you couldn't take any deductions until your expenses exceeded $4,500.
Other Deductible Expenses
It's unlikely your prescription drug co-pays alone are going to exceed the adjusted gross income cutoff. However, you can combine your co-pays with other qualified medical expenses to increase your deduction. Anything you pay for prevention, diagnosis and treatment of diseases falls under the qualified expenses umbrella. So do out-of-pocket payments for doctor's visits, surgeries and insulin costs.
Only for Itemizers
You'll have use Schedule A of Form 1040 to itemize your health expenses. The downside to itemizing is you can't claim the standard deduction. That doesn't make sense unless your total itemized deductions exceed your standard deduction. Other itemized deductions you might be eligible to claim include state and local income taxes, charitable donations and mortgage interest.
Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."