Tax question - medical expenses (paycheck, interest, tax return, income)

[christina0001]

I'm estimating my out of pocket medical expenses this year will be about 10% of my income. I am under the impression that if they exceed 7.5% of your income, they are deductible? If this is the case, would it make sense to decrease the amount of taxes withheld from my paycheck? I generally break even with the state, and get a small return from the federal government.

[chet everett]

2.5% seems like an awful narrow window to aim for. If you already have paid the medical expenses and are nearly certain that your true out of pocket costs are well above the threshold it might make sense to dial back withholding, but otherwise...

[Elke Mariotti]

I agree with Chet - unless you've spent the money already, you can't be 100% certain. Underwithholding can cost you interest and a penalty.

Also, the 7.5% is off your AGI (Adjusted Gross Income), so if you have any interest or other incidental income, that'll be added to your W-2 income. There are other adjustments as well, so unless you're very familiar with tax returns, I wouldn't mess with the deductions for now. Once you've paid all the medical expenses you expect to pay, you can then lower your withholding for the remainder of the year by filling out another W-4 with your employer.

Not wanting to wait till next year for the tax refund makes sense - but only if you have facts, not estimates... JMHO

[christina0001]

I'll won't change my withholdings, but for the most part, the money has already been spent. I've spent about 9% of my income on uncovered medical expenses, and by the end of the year I am estimating it to be about 10%. And I don't anticipate any surprise increase in my income.
Thanks for the advice.