Monday we began our discussion on itemized deductions by talking about mortgage interest, Tuesday our attention turned to the types of taxes that are deductible, and yesterday we are discussed charitable donations. Today we will talk about Medical Expenses.
I am self-employed, married, and father of one teenage boy, and a preteen boy. I pay for my own medical insurance. My insurance costs a little under $17,000.00 per year. My wife has Lupus, my boys go to the doctor all the time, and me…well I am getting older, and have entered the time of my life where I having a surgery per year. Not to mention that my local pharmacy knows my wife and I by our names. Even though my medical insurance is really expensive, I still win the game each year when it comes to medical costs. Medical expenses are tax deductible. That’s right! Now before you get out that calculator and wading through your receipts, as Paul Harvey would say “Now here’s the rest of the story.”
For tax year 2012 medical expenses are subject to 7.5% of adjusted gross income (AGI). What that means is let’s say you make $50,000.00 per year, you could deduct the portion of medical expenses that you have in excess of $3,750.00. Think that’s bad; for tax year 2013, the AGI limitation goes up to 10%. So instead of needing expenses in excess of $3,750.00, you will need expenses in excess of $5,000.00. Before you put down that calculator, and trash those receipts, let’s talk about what is considered a medical deduction.
First let’s talk about whose medical expenses you can deduct. Generally, you can deduct qualified medical expenses for yourself, your spouse, and your dependents. So, anyone that is not your dependent or your spouse you can’t take a deduction for.
Now let’s discuss what is deductible. The first medical expense that most people overlook is the portion of your medical insurance that you pay. Generally, you can deduct the amount of premiums that are taken out of your paycheck. In addition you can deduct the obvious costs such as doctor copays, deductibles, prescription medicine costs, just to name a few. However here is a partial list of medical expenses that you can take a deduction for as well:
· Air conditioner necessary for relief from allergies or other respiratory care
· Alcohol treatment, including inpatient treatment, meals and lodging at the therapeutic center
· Birth control pills
· Braille books and magazines used by a visually-impaired person
· Get this: a clarinet and lessons to treat the improper alignment of a child’s upper and lower teeth
· Cosmetic surgery, if it is necessary to improve a deformity related to a congenital abnormality, accident or disease
· Don’t give up on your New Year’s Resolution of losing weight. Diet special. When prescribed by a doctor, you can deduct the extra cost of purchasing special food to alleviate a specific medical condition
· Drug addiction treatment. Including in-patient treatment, meals and lodging at a therapeutic center for drug addiction
· Elastic hosiery to treat blood circulation problems
· Exercise program if a doctor has recommended it as a treatment for a specific condition
· Extra rent or utilities for a larger apartment required in order to provide space for a nurse or attendant.
· Eye surgery, such a Lasik or a similar procedure, when it is not for cosmetic purposes
· Guide dog or animal used by a visually impaired, hearing impaired or otherwise physically disabled person
· Household help for nursing care services only
· Lab fees
· Lead based paint removal, including the cost of removing led-based paints from surfaces when a child has lead poisoning or was previously diagnosed with lead poisoning
· Legal fees paid to authorize treatment for mental illness (and they say that the costs of lawyers are insane!)
· Lifetime care advance payments
· Lodging expenses while away from home to receive medical care in a hospital or medical facility
· Long-term care insurance and long-term care expenses
· Mattresses and boards bought to specifically alleviate an arthritic condition
· Medical conference admission costs and travel expenses for a chronically ill person or parent of a chronically ill child to learn new medical treatments
· Reclining chair bought on a doctor’s advice by a person with a cardiac condition
· Swimming (the cost of therapeutic swimming prescribed by a physician)
· Telephone. The cost and repair of special telephone equipment for a hearing impaired person
· Television. The cost and repair of special telephone equipment for a hearing impaired person
· And too end my list Whirlpool baths if prescribed by a doctor.
I know that some of this sounds outrageous, but this was all taken from IRS Publication 502.
Even though you have to have a lot of medical expenses to be able to deduct them, perhaps you should look again. As always, consult your tax accountant before you make these purchases.
For more information visit www.smalleynco.com
If you have any questions you can email Craig W. Smalley E.A.
Author of the books: It Starts With an Idea – Tax Tips for Small Businesses available on Nook and Kindle, The Ultimate Real Estate Investor Tax Guide, available on Nook and Kindle, The Complete Guide to the New Tax Law – American Taxpayer Relief Act of 2012 available on Nook and Kindle, Everything You Wanted to Know about the IRS – Audits, Appeals and Collections available on Nook and Kindle, Tax Avoidance is Legal! The Complete Guide to Individual Income Tax available on Nook and Kindle, The Complete Guide to the Affordable Care Act’s Tax Provisions available on Nook and Kindle, and The Complete Guide to Retirement Plans for Small Businesses available on Nook and Kindle