YOU may deduct medical expenses only to the extent that expenses for doctors, drugs, insurance, etc. exceed 10 percent of your adjusted gross income. This means that you lose the first 10%. Only the excess is deductible. This is called for budget deficit reduction, folks.
1. Only prescribed drugs are deductible. Over-the-counter drugs are not, except for insulin.
2. Medical expenses of a dependent (child, parent, and other relatives) may be deductible even if the dependent fails the gross income test and could not be claimed as a dependent.
3. The IRS just issued a Revenue Ruling stating that the cost of stop-smoking programs and prescribed drugs to alleviate nicotine withdrawal are deductible expenses (non-prescribed nicotine gums and patches are still not deductible).
4. Along the same reasoning, the cost of weight reduction programs to cure a specific disease is deductible. Similar costs to improve a sense of general well being are not.
5. Amounts for psychiatric treatment of sexual inadequacy which do not afflict our readers are deductible. Marriage counseling fees are not deductible either.
6. Hair transplants that are essential to mental health are deductible; tattooing and ear piercing are not.
7. Insurance premiums to replace contact lenses if these are lost or damaged are deductible.
8. You may deduct lodging expenses while away from home to secure medical treatment. The patient has to be under the care of a physician at a hospital or outpatient clinic. The maximum amount is $50 per night for patient and attendant. No deduction is allowed for food and vacation.
9. You may deduct standard travel mileage for medical purposes at 23 cents per mile.
10. Because more and more of us can no longer tolerate our faces and bodies as nature made them, we turn to nose lift, front lift, fork lift. A new section of the Internal Revenue Code prohibits cosmetic surgery as a tax deduction unless the procedure is necessary to ameliorate a deformity arising from a congenital abnormality or personal injury from an accident or disfiguring disease. Sorry.
11. You may deduct long-term care insurance premiums and long-term care expenses as medical expenses. Your employer can also provide long-term care insurance to you as a tax-free fringe benefit.
12. You may deduct contributions to a new medical savings account (MSA) if you are covered by a high-deductible health plan.
13. Deductions for Medical Insurance Premiums For Self-Employed individuals are now 100 percent deductible. (Tip: Hire your spouse as a legitimate employee, make him/her work, then pay and deduct his/her medical benefits. Oh yes, cover the children, too. )
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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.