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
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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.
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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. |
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Dentures,
hearing aids and orthopedic shoes. |
Household
help, even if recommended by a
doctor. |
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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). |
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Lamaze
classes for a mother-to-be. |
Maternity
clothes. |
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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.
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Retin-A
for wrinkles |
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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)
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