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Medical Expense Deductions

 

                   
   Count Every 
   Eligible Expense

It's difficult for many people to write off medical expenses because of the limits imposed under the tax laws. But you may qualify by including every expense allowed. Some of the qualified procedures

ELIGIBLE

A weight-loss program undertaken at a physician's direction to treat obesity or a condition such as heart disease.

NOT ELIGIBLE

A weight-loss program to maintain your appearance.

Treatment at a drug or alcohol clinic. Smoking-cessation program and prescribed drugs for nicotine withdrawal.

Trips your doctor recommends to rest or improve your morale.

Acupuncture.

Marriage counseling.

Dentures, hearing aids and orthopedic shoes.

Household help, even if recommended by a doctor.

Admission and transportation to a medical conference if the conference concerns the chronic illness of you, your spouse, or a dependent. (Meals and lodging are not deductible.)

The collection and storage of DNA, unless you can show how DNA will be used for diagnostic testing. (IRS Private Letter Ruling 200140017). 

Lamaze classes for a mother-to-be.

Maternity clothes.

A wig purchased on the advice of a physician for the mental health of a patient who is bald from disease.

Hair transplants.

Teeth cleaning and orthodontia work.

Teeth bleaching and toothpaste.

Contact lenses and the cost of such peripheral materials as saline solution and enzyme cleaner.

Retin-A for wrinkles

Nursing services at home or a care facility, including giving medication, changing dressings, bathing and grooming.

Nursing services for a normal, healthy baby. (But you might be able to take a credit for child-care expenses.)

may surprise you.

For example, most insurance plans won't cover laser eye surgery, such as radial keratotomy or "Lasik," because they consider it a cosmetic procedure. But it generally qualifies for a medical deduction and as an expense in a flexible spending account. (The IRS used to disallow Lasik as a medical expense.) With the cost running $1,200 or more in most parts of the country, it's a considerable outlay. 

As with most tax laws, the medical rules can be tricky. You can't deduct over-the-counter vitamins but the Tax Court has ruled that medically-prescribed vitamins to treat a specific condition are allowed.

There are also many exceptions to the general laws. For instance, you can't write off the cost of unnecessary cosmetic surgery to improve your appearance. That generally means no face lifts, electrolysis or liposuction. But you can deduct cosmetic surgery that's needed to improve a deformity directly related to a congenital abnormality, an injury from an accident, or a disfiguring disease. 

A list of some other expenses that are eligible or ineligible for tax breaks appears in the right-hand chart. Here's a rundown of the basic rules:

 Flexible spending accounts. These tax-advantaged accounts have a "use-it-or-lose-it" feature on money left at the end of the year. So plan to empty your account by buying eyeglasses, filling prescriptions, getting a dental checkup or spending money on the eligible items listed in the chart.

 Medical deduction. Medical and dental expenses that are not reimbursed by insurance are deductible to the extent your annual total exceeds 7.5 percent of your adjusted gross income (AGI). To qualify for medical deductions, you must itemize and the expenses must be paid for medical care. General health benefits, such as membership to a health club, are almost never eligible.

When adding up your medical costs, don't forget the cost of traveling to your doctor or medical facility for treatment. If you go by car, you can deduct a flat rate in 2006 of 18 cents a mile (in 2005, the rate for Jan-Aug was 15 cents, and for Sept-Dec, 22 cents per mile) or you can keep track of your actual out-of-pocket expenses for gas, oil and repairs. In either case, you can add in the amounts paid for parking and tolls. If you must travel out of town for medical treatment, you may also qualify to write off some of the cost.

As year-end approaches, take a look at your medical expenses. If you are close to or exceed the 7.5 percent threshold you may want to get as many expenses as possible into this year. Otherwise, you may as well postpone elective expenses until next year when you have another shot at a deduction. 

 Taxpayer winner: While the law doesn't allow a medical expense deduction for procedures performed just to improve appearance, cosmetic surgery can sometimes qualify for a tax break.

In one case, a taxpayer was employed as a hospital emergency room nurse. Without surgery, she lost more than 100 pounds. But as a result of her weight loss, she had a "mass of loose-hanging skin" that prevented her from the frequent bending and other duties involved in her job. To remove the mass, she underwent three surgeries that included liposuction.

The procedures were not covered by health insurance and the taxpayer deducted the costs involved as a medical expense deduction on her tax return. The IRS disallowed the write-off because it was "cosmetic" and wasn't necessary "to ameliorate a deformity arising from or directly related to a disfiguring disease."

The Tax Court disagreed and allowed a deduction. In the decision, the court stated that "obesity is well recognized in the medical community as a serious disease," and so the surgeries qualified under tax law. (Al-Murshidi, TC Summary Opinion 2001-185)

Virtualex.com Ronald J. Cappuccio, J.D., LL.M.(Tax) 1800 Chapel Avenue West Suite 128 Cherry Hill, NJ 08002 Phone:(856) 665-2121      Fax: (856) 665-9005 Email: ron@taxesq.com

 
 
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