Cough! Cough! Oh, You Are Sick? The IRS Has a Deduction for You! (Well, maybe . . . )

Stephen Ganns, http://www.http://stephenjgannscpa.com/, discusses tax deductions related to health.Over the years as people have prepared their taxes, they have always been aware that there is this strange medical/dental deduction. This deduction is very grey in some areas. Many people have tried to say:

Well, I get a gym membership so that must be medical because that keeps me well, and my doctor said I should ride a bicycle, so I’m going to get a bicycle and that also will be a medical deduction.”

Well, not all of that is true. Some gym memberships, in fact, can be deductible, but they must be prescribed by a doctor for a certain medical condition, not suggested by a doctor as a way for better health.

Medical and dental expenses are a very limited deduction and are very specific as to what is deductible or not.

In order to deduct medical and dental expenses, you must itemize.  Itemization means you list this deduction along with other deductions such as taxes, mortgage interest, and contributions.

But that’s not the only condition! For a long time, you could deduct whatever you spent over 7.5% of your adjusted gross income (AGI).  Starting in 2013, for people under 65, the threshold is now 10% of your AGI.  For people over 65 1/2, the limit is and will remain at 7.5% until 2017.

Basically, the expenses that qualify are most medical and dental costs that you pay for “out-of-pocket,” including long- term care, medical and or dental insurance.  Also included are doctor visits, dental visits, and any medication prescribed by a doctor, such as for high blood pressure or cholesterol.

  • Vitamins, unless prescribed specifically, are not deductible.
  • Supplements, unless prescribed specifically, are not deductible.

One of the little things that many people are not aware of is that travel for their own doctor visits or to visit a dependent or spouse who is sick or to take them to doctor’s appointments is deductible.  The IRS allows a mileage deduction as well as parking, tolls, and even overnight stays when applicable.

My personal hope is that not many of you reading this will have to use this deduction. It would mean that you have been very sick.  However, because not many people have dental insurance, there are times when dental expenses may get you over the threshold.  As a side note, if you are going to have dental work, please try to pay for it all in one year, even if the services are to be performed over two years.  If you can work it out with your dentist to pay in one year, it will benefit you in getting over the 10% or 7.5% thresholds.

Another way through the 10% itemized deduction limit is to see if your employer has a Flexible Spending Arrangement (FSA) which allows you to pay for medical and dental costs pre-tax, which is much better than deducting the amounts on your tax return.  However, there is no double benefit.  You cannot use a Flexible Spending Account for qualified dental and medical accounts and then deduct those same expenses on your tax return.

To reiterate:

  • First of all, try not to get sick because who needs this deduction anyway.
  • Secondly, if you do get sick and need medical or dental work, try to bunch costs all in one year when applicable in order to exceed the deduction limit.
  • Don’t forget to keep track of your medical/dental mileage.

Stephen J. GannsStephen J. Ganns, CPA
914-682-7007
steve@gannscpa.com
www.gannscpa.com

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