Tax deductions can drastically reduce your total tax liability and allow you to save money. While medical bills can be a significant hardship for many individuals and families, it is critical to understand that certain medical expenses are tax deductible. Understanding the eligibility criteria and documentation requirements will help you in optimizing your deductions and possibly lowering your tax payment. In this post, we will look at medical expenses that are tax deductible.
Tax Deductible Medical Expenses
You might be surprised to hear that the IRS lists over 80 medical expenses that you can deduct from your taxes. While the full list of eligible expenses can be found on IRS Publication 502, some common expenses include:
Acupuncture
Ambulance services
Braille reading materials
Costs incurred to accommodate your home to a disabled condition
Costs incurred to install special equipment in your vehicle that accommodates a disabled condition
Chiropractor
Contact lenses
Dental treatment
Eye exams
Fertility treatment
Hearing aids
Lab fees
Medicines
Nursing home expenses
Physical exams
Psychiatric care
Transplants
X-rays
Medical Expenses That Are Not Tax Deductible
You should always be aware of the medical expenses you may not deduct during tax time including but not limited to:
Cosmetic surgery (some limitations apply)
Funeral expenses
Future medical care
Maternity clothes
Nonprescription drugs and medicines
Nutritional supplements
How to Claim Medical Expense Deductions
In order to deduct medical expenses on your tax return, you will need to itemize your deductions. That being said, it is really only worth doing if your medical expenses exceed the standard deduction. The 2025 standard deduction is $14,600 for a single filer and those who are married but filing separately, $29,200 for married couples filing jointly, and $21,900 for heads of households. These figures have increased for tax year 2025 to the following:
Single Filers, Married Couples Filing Separately: $15,000
Married Couples Filing Jointly: $30,000
Heads of Households: $22,500
If it seems itemizing your deductions would save you money than taking the standard deduction, you can deduct your qualified medical expenses using Schedule A. Keep in mind that you may only deduct unreimbursed medical expenses paid during the year previous. In addition, you can only deduct expenses that exceed 7.5% of your adjusted gross income (AGI). For example, if your AGI is $45,000, then the first $3,375 (7.5% of $45,000) of qualified medical expenses cannot be deducted. Anything that exceeds $3,375 can be deducted. Assuming you had $10,000 of unreimbursed medical expenses for the year, you would be allowed to deduct $6,625 of it on your tax return.
If you do decide to deduct medical expenses during tax time, be sure to keep adequate records of your expenses during the year. Keep receipts, invoices, statements, and any other relevant documentation that validate your medical expenses. Not doing so can result in financial loss, risk of audits, and dealing with the IRS. If the IRS has reached out to you about your tax situation, we can help. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.
It can be difficult and frustrating to deal with tax debt. You might be concerned about whether the IRS has the right to seize your assets if you owe taxes to them and haven’t taken steps to address the debt. Understanding which assets the IRS can seize is crucial for taxpayers, particularly those facing financial difficulties. Here’s a comprehensive overview of what the IRS can and cannot seize.
Can the IRS Seize My Assets?
The simple answer to this question is yes. The IRS can legally seize your assets to pay off a tax balance you owe. However, it is crucial to remember that the IRS normally views asset seizure as a last resort. Before initiating asset seizure, it is your taxpayer right to be notified. The IRS will make several attempts to collect the tax debt through IRS notices and other means before resorting to seizures. This is so you can attempt to correct the issue, perhaps with an installment agreement or offer in compromise. If you do not respond to IRS notices, they will impose a tax lien on your property. Only after this and a final warning will the IRS seize any assets.
Which Assets Can the IRS Seize?
Almost any item that has worth or equity and may be sold for cash can be seized by the IRS. Some of these assets can include:
Property
The IRS can place a lien on your property, such as your house or other real estate, establishing their legal claim to it. In some situations, they may seize and sell the property to recover the debt. However, seizing a primary residence is considered a last resort, and the IRS must go through a judicial process before doing so. The sale of the property typically occurs through a public auction, with the proceeds used to satisfy the tax debt.
Vehicles and Other Personal Assets
To satisfy your tax burden, the IRS may confiscate and sell your vehicles, boats, jewels, or other personal assets. However, the IRS typically considers the value of the vehicle and the amount of debt before deciding to seize it, as the cost of seizure and sale may not always justify the action.
Bank Accounts
The IRS can levy funds from your bank accounts to satisfy your tax debt. Bank levies are one-time only. This means the IRS can only take what is in the bank account now. You can deposit and withdraw funds from the account in the future. However, the IRS can always issue more levies in the future. The IRS typically notify you of this action, giving you a short window to contest the levy or arrange payment.
Retirement Accounts
The IRS has the legal authority to seize your 401(k) and other retirement savings, including self-employed plans. Although these accounts are shielded from creditors, the IRS has the legal right to confiscate funds from your retirement savings to recoup back taxes owed. However, certain rules and limitations apply, particularly regarding early withdrawal penalties and the protection of certain types of retirement accounts under federal and state laws.
Life Insurance
In certain cases, the IRS can even seize life insurance benefits, particularly if the policy has a cash surrender value. If you are the beneficiary of a life insurance policy and you owe the IRS, the IRS can seize those proceeds. Additionally, if you have a life insurance policy with no beneficiary named and you owe the IRS, the IRS can seize the policy funds before they are distributed to your next of kin.
Wages
The IRS has the authority to issue a wage garnishment, which means that they can legally order your employer to withdraw a percentage of your salary to pay off your tax debt. This can be a significant financial burden, as the levy continues until the tax debt is fully paid. The IRS also has the authority to seize other forms of income, including rental income, Social Security benefits, and even commissions. However, the IRS typically cannot seize the death benefit itself unless it has already been paid out and is part of the taxpayer’s estate. Additionally, term life insurance policies without a cash value are generally not subject to seizure.
Business Assets
For business owners, the IRS can seize business assets, including equipment, inventory, and accounts receivable. This can be devastating for a business, as it can disrupt operations and lead to financial instability. The IRS may also target the business’s bank accounts and income streams.
Which Assets Can the IRS Not Seize?
In general, any asset not necessary for your well-being and shelter (or the survival and shelter of your family) may be confiscated to pay the IRS what you owe. This can include:
Assistance provided by the Job Training Partnership Act
How Can I Protect My Assets from Being Seized by the IRS?
The good news is that an IRS asset seizure will never come as a surprise. Once you are aware that you owe the IRS, you should get to work on resolving the issue. However, we know that sometimes this isn’t always possible. You may have already received multiple IRS notices, and maybe one was an Intent to Levy. It’s not too late to get help from the nation’s leading tax resolution firm. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.
Property taxes are a significant aspect of homeownership and real estate investment. They are levied by local governments and are a critical source of funding for public services such as schools, roads, and emergency services. Property taxes are paid on property owned, either by an individual or a legal entity. How much property tax you are required to pay is determined by the local government where the property is located. Understanding how property taxes work and the rules regarding tax deductions can help property owners manage their finances more effectively.
What Are Property Taxes?
Property taxes are a form of tax levied by local governments on real estate properties, including both land and structures. These taxes are a primary source of revenue for municipalities, counties, and school districts, funding essential public services such as education, transportation, emergency services, and infrastructure maintenance.
How Property Taxes Are Calculated
Property taxes are typically calculated based on the assessed value of the property and the local tax rate, often expressed as a millage rate.
Assessment of Property Value
The assessed value of a property is determined by a local tax assessor, who evaluates the property periodically. This assessment considers various factors, including the property’s size, location, condition, and recent sales of similar properties in the area.
Millage Rates
A millage rate. Sometimes called a mill tax, is the amount per $1,000 of property value that is used to calculate local property taxes. For instance, a millage rate of 20 mills means that $20 in tax is levied for every $1,000 of assessed property value. The mill tax is multiplied by the property value to calculate your assessed value of your property. This is then used to find the fair market value of your property. This figure is multiplied by an assessment rate to calculate your tax bill.
Your property tax bill may be higher or lower than your neighbor’s. One example is if your plot of land is larger. Another is if your home’s assessed value is higher. In some rare cases, your neighbor’s property may fall in a different jurisdiction with a lower mill tax rate, resulting in a smaller tax bill.
Who Pays Property Taxes?
Typically, most owners of property must pay property taxes, whether they are an individual or legal entity. However, there are some groups or property types that are exempt. These include senior citizens, those with disabilities, and military veterans. Additionally, there is a homestead exemption that reduced property tax bills. The rules for exemption vary by state or municipality so it’s best to check with your local and state government. Also note that the agencies that collect property taxes will not always notify you if you do qualify for an exemption and you may need to apply for it on your own.
How to Pay Property Taxes
Property taxes are typically paid annually or semi-annually. Homeowners receive a bill from their local tax authority, detailing the amount owed and the due date. Many mortgage lenders require borrowers to set up an escrow account to cover property taxes and homeowners’ insurance. Each month, the homeowner pays a portion of the estimated annual property tax and insurance costs into the escrow account. The lender then pays the tax bill on behalf of the homeowner when it is due.
What If I Don’t Pay My Property Taxes?
Put simply, failing to pay property taxes can result in a lien on your home. A lien is a legal claim against your property that can be used as collateral to repay the debt owed. If you still do not pay off the balance, the taxing authority can legally sell your home, or sell the tax lien. In this case, the purchaser of the lien can have your home foreclosed or use other methods to obtain the deed to your property. The consequences vary by state. If you’re struggling to pay your property taxes, some local governments offer payment plans or tax deferral programs. These programs can help spread out payments over time and avoid penalties.
Property Tax Deductions
Property taxes can be a significant expense, but homeowners may be able to offset some of the cost through tax deductions. The SALT deduction allows taxpayers to deduct certain taxes paid to state and local governments, including property taxes, from their federal taxable income. However, the Tax Cuts and Jobs Act (TCJA) of 2017 capped the SALT deduction at $10,000 per year ($5,000 for married individuals filing separately). This cap is in place through 2025 unless new legislation is enacted. To claim the property tax deduction, homeowners must itemize their deductions on Schedule A of their federal income tax return. Itemizing is only beneficial if total itemized deductions exceed the standard deduction.
For rental properties and investment real estate, property taxes are considered a business expense and can be deducted from rental income. This deduction is not subject to the SALT cap. Homeowners who use part of their home for business purposes may be eligible for a home office deduction. However, only the portion used for business can be deducted.
Tax Relief for Homeowners
It goes without saying that all property owners should stay on top of their property tax bills. Understanding how property taxes are assessed and the rules for tax deductions can help homeowners and real estate investors manage their tax burden more effectively. Always stay informed about changes in tax laws and consult with a tax professional to ensure you are maximizing your deductions and complying with all regulations. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities.
If all goes well during tax season, you file your tax return, get a decent tax refund and wait to do it all again next year. But what happens if you file a return but then notice an error? Do you let it be or file an amended return? If there are simple math errors, the IRS should be able to correct those on their own. However, if you noticed you made an error in your filing status, income, dependents, or credits, you should amend your return through Form 1040-X. This guide will walk you through what happens when you amend your tax return, detailing each step and what you can expect throughout the process.
How to Amend Your Tax Return
When you amend your tax return, you submit Form 1040-X, Amended U.S. Individual Income Tax Return, to the IRS. Typically, you’d file an amended return to correct major mistakes in income, adjust tax credits and deductions, change your filing status, or update your personal information. You may attach any new or corrected forms and schedules if necessary.
How Long Does It Take Amended Returns to Process?
Amended returns take longer to process than original returns due to the detailed review required by the IRS. In addition, the IRS processes amended returns in the order they receive them. According to the IRS website, you should typically allow 8-12 weeks for it to be processed. However, it can take up to 16 weeks. You should not attempt to file a second tax return or call the IRS during this wait period.
You can use the Where’s My Amended Return? (WMAR) IRS online tool to check the status of your return and confirm the IRS has received it. However, this tool will only show amended return statuses for this tax year or up to 3 prior years. You can use this tool almost 24 hours a day. These tools should not be utilized until three weeks after filing the return. This is when status updates may become available. You can also call the IRS for an update. However, phone calls should be reserved for when the WMAR is not available or when it prompts you to call the IRS.
How to Use the Where’s My Amended Return? Tool
To check the status of your amended tax return, you’ll need your social security number, date of birth, and zip code that is currently on file with the IRS. Once you proceed, you will see one of the following statuses of your return.
Status: Received
The IRS received your amended return and they are processing it. It currently takes up to 16 weeks to complete processing.
Status: Adjusted
An adjustment was made to your IRS account. The adjustment will result in a refund, balance owed or in no tax change. You can make a payment via mail, online, or through the IRS Direct Pay system.
Status: Completed
The IRS finished processing your return. You will receive all the information connected to its processing by mail.
Why Hasn’t My Amended Return Been Processed Yet?
In some cases, the IRS still may not have processed your amended return, even after the 16-week timeline. This can happen for several reasons including:
It has errors
It is incomplete
It is not signed
It is returned to you requesting more information
It includes a Form 8379, Injured Spouse Allocation
It is affected by identity theft or fraud
It is routing to a specialized area
It requires clearance by the bankruptcy area within the IRS
It needs to be reviewed and approved by a revenue officer
It needs a review of an appeal or a requested reconsideration of an IRS decision
In any case, the IRS will contact you if it needs more information to get your amended return processed.
Tax Help for Those Who Amended a Return
You should always ensure that you are filing a complete and accurate tax return so you can avoid filing an amended return. Sometimes amending a return could potentially trigger an audit or other examination by the IRS. If you find that you cannot avoid amending your tax return, make sure to follow the correct steps, provide all necessary information, and be patient while waiting for the IRS to process your return. When in doubt, you can also contact a qualified tax professional for assistance. Optima Tax Relief has a team of dedicated and experienced tax professionals with proven track records of success.
Although it is not recommended, sometimes borrowing from your 401(k) savings is necessary to cover unexpected expenses or hardships. When it comes to accessing funds from your 401(k) account before retirement age, you generally have two options. You can take out a loan or make a withdrawal. Each option has distinct characteristics and tax implications that can significantly affect your financial planning. Here’s a comprehensive look at the differences between 401(k) loans and 401(k) withdrawals, with a focus on how each impacts your taxes.
401(k) Loans
A 401(k) loan allows you to borrow money from your retirement savings. However, you must repay it with interest within a specified period.
How Much Can I Borrow?
Typically, the maximum amount that can be borrowed is 50% of your vested account balance, up to $50,000 in a 12-month period. However, since 401(k) accounts are distributed through employers, each plan can come with different rules and limitations.
What are the Tax Implications?
Since this option is considered a loan, the funds will need to be returned to the account. The loan period is usually within 5 years. This also means that no taxes or penalties will need to be paid on the loan because the borrower is expected to return the money. Borrowers should keep in mind that this option does come at a price as the loan will require paying interest. Interest paid will go back into the account. While this may seem beneficial, it’s important to note that the interest is paid with after-tax dollars, which will be taxed again upon retirement withdrawal. In addition, there’s an opportunity cost because the borrowed amount is not invested during the loan period, which could reduce your account’s growth potential.
Beware of Missed Payments and Leaving Your Employer
Some borrowers may wonder what happens if you miss a payment or even default on the loan. The good news is your credit score will not be impacted. The only exception to this is if you leave your current job. If you fail to repay the loan as per the terms (e.g., within five years or upon leaving your job), the outstanding loan balance is treated as a distribution. This means it becomes subject to ordinary income tax and, if you’re under 59½, a 10% early withdrawal penalty.
Since a 401(k) account is an employment perk, the benefits are withdrawn once you are separated from the employer. Sometimes, borrowers are required to repay the loan within a short period of time after termination, and failure to do so can result in not only a defaulted loan but taxes and penalties.
401(k) Withdrawals
A 401(k) withdrawal involves permanently removing money from your retirement account. Withdrawing from your 401(k) once you reach age 59½ won’t result in any tax penalties. However, some early withdrawals will. On the other hand, some will not.
What If I Withdraw Early?
If you withdraw funds before reaching the age of 59½, you typically face a 10% early withdrawal penalty in addition to regular income taxes. However, there are certain exceptions, such as substantial medical expenses or permanent disability. These exceptions can waive this penalty.
What If I Withdraw Late?
Starting at age 72, the IRS mandates required minimum distributions (RMDs) from your 401(k). Failing to take RMDs can result in a substantial penalty, equal to 50% of the amount that should have been withdrawn. So, don’t be too early with withdrawals but don’t be late either.
What If I Withdraw Due to Hardship?
If you qualify for a hardship withdrawal, you may avoid the 10% penalty, but the amount is still subject to regular income tax. Some examples of hardship that the IRS deem a 401(k) withdrawal an acceptable form of financial relief are:
Withdrawals from a traditional 401(k) are subject to federal and state income tax. The amount withdrawn is added to your gross income for the year, which can potentially push you into a higher tax bracket.
Tax Relief for 401(k) Account Holders
Borrowing from your 401(k) should not be your first choice for immediate funds. Instead, borrowers can use their HSA savings for medical expenses and regular savings and emergency funds for other expenses. However, if you absolutely must use your retirement savings, be sure to understand your options. Deciding between a 401(k) loan and a 401(k) withdrawal requires careful consideration of your financial needs and the tax implications of each option. Loans can provide a tax-efficient way to access funds without immediate penalties, but they require disciplined repayment to avoid tax consequences. Withdrawals offer quick access to cash but come with significant tax liabilities and potential penalties, especially if taken before retirement age. Optima Tax Relief has over a decade of experience helping taxpayers with tough tax situations.