With the recent developments in the battle against COVID-19, health authorities are turning to tests for the virus that can be carried out at home. New clarification from the IRS now aims to spread the word that such home tests can be deducted from income taxes.
The Internal Revenue Service says the costs for home tests for COVID-19 is an eligible medical expense and as such, can be paid or reimbursed through a number of existing flexible spending arrangements, including;
- Health flexible spending arrangements (health FSAs);
- Health savings accounts (HSAs);
- Health reimbursement arrangements (HRAs); or
- Archer medical savings accounts (Archer MSAs).
Generally, taxpayers can deduct only the amount of their medical and dental expenses that totals more than 7.5% of their AGI. The deduction is reported on Schedule A (Form 1040).
In addition to home COVID tests, taxpayers can also deduct costs for personal protective equipment such as masks, hand sanitizer and sanitizing wipes. The IRS sent out Announcement 2021-7 in March that these supplies are also eligible medical expenses.
Supplies also may be paid or reimbursed through FSAs, HSAs, HRAs, or Archer MSAs.
Publication 502, Medical and Dental Expenses, has details on what medical expenses are deductible—and some that are not.
Another resource is Can I Deduct My Medical and Dental Expenses?, also found on IRS.gov.
Sources: IR-2021-181; Publication 502 (2020), Medical and Dental Expenses.
Trussell Tax