MOST of us take medical expenses for granted because we have to spend more than 7 ½ % for 2012 (10% for 2013 if you are under 65) of our gross income before we can deduct medical expenses. However, changes in health care plans make this a good time to brush up on 10 medical expenses.
1. Only Prescription Drugs are deductible. Over-the-counter drugs, even if taken to alleviate medical conditions, are not deductible. In other words, no prescription, no deduction.
2. Special Diet has to be prescribed by a physician for a specific ailment or supplemental to a regular diet. It should not be used for general well being or substitute for general meals.
3. Weight Loss Programs are deductible – again. The IRS ruled against weight loss programs but recently reversed itself, meaning that the cost of weight loss programs prescribed by physicians to cure specific ailments is now deductible. However, the Service emphasizes that the cost of diet foods is still nondeductible. Despite earlier private letter rulings, the IRS also states that costs to join gym and health clubs remain nondeductible even if prescribed by physicians for weight loss.
4. Cosmetic Surgery is nondeductible unless it treats an illness or disease. Common procedures such as face-lifts, breast augmentation, and liposuction are not medically necessary and are therefore not deductible.
5. Medical Expenses of Dependents are deductible even after we lose their dependency exemptions. When our children and other dependents exceed gross income tests, we lose them as dependents for exemption purposes. But not medical expenses. In other words, you may continue to deduct medical costs for dependents even if you can no longer take their exemptions for income tax purposes.
6. Capital Expenditures that do not relate to permanent improvements and are prescribed by physicians are fully deductible. These include wheelchairs, crutches, and portable oxygen equipment.
7. Improvements to Property such as home elevators, hot tubs, air conditioning, and swimming pools, are deductible only to the extent that costs exceed any increase to value of the property. Maintenance of these improvements to treat continuing medical care is always deductible.
8. Long-term Care Services paid to nursing homes and assisted living facilities for diagnostic, therapeutic or rehabilitative services prescribed by a doctor are deductible.
9. In-Home Health Care Costs for nurses, attendants, and caregivers are deductible if prescribed by a licensed healthcare practitioner for medical or long-term care.
10. Travel Costs for the diagnosis, cure, mitigation, or prevention of a specific disease are deductible. Travel to a golf course even if recommended by a doctor to develop motors skills is not. Travel to Hawaii during winter to stay away from cold weather to alleviate arthritis or escape the flu season is not deductible either. Nice try though.
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Victor Santos Sy, CPA, MBA, provides professional services in accounting and tax controversy including IRS audit defense and offers in compromise. He also advises clients on choices of entity including corporations for small businesses and LLCs for rentals. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation at 704 Mira Monte Place, Pasadena, CA 91101. The firm celebrates its 35th anniversary this year. You may email tax questions to Vic at [email protected]. You are welcome to visit our website for more than 300 tax tips at www.victorsycpa.com.