Archive for Medical Expenses

Medical and Dental Expenses – IRS Publications 502 + 969

May 13, 2012 Medical Expenses

This post is a quick overview of IRS Publication 502, Medical and Dental Expenses and IRS Publication 969 Health Savings Accounts and Other Tax-Favored Health Plans.

You can deduct expenses primarily paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or treatment affecting any structure or function of the body. For drugs, you can only deduct prescription medication and insulin. You can also include premiums for medical, dental and some long-term care insurance in your expenses. Starting in 2011, you can also include lactation supplies.

If you, your spouse or dependents had medical or dental costs as defined above, you may be able to deduct those expenses if they in total for the year exceed 7.5% of your adjusted gross income. You deduct qualifying medical and dental expenses if you itemize on Form 1040, Schedule A. You can include the medical and dental expenses you paid during the year, regardless of when the services were provided. Be sure to keep good receipts or records in order if called upon to substantiate your expenses as I have been seeing an increase in audits specifically targeting this deduction.

Your total medical expenses for the year must be reduced by any reimbursement received. Normally, it makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital. Some exceptions and special rules apply to divorced or separated parents, taxpayers with a multiple support agreement or those with a qualifying relative who is not your child.

You may deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. You can deduct the actual fare for a taxi, bus, train, plane or ambulance as well as tolls and parking fees. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses, which is 19 cents per mile for 2011.

Distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if used to pay qualified medical expenses including prescription medication and insulin.

No comments , , ,

Qualified Medical Expense Tax Deductions for Long Term Care Services

January 27, 2012 Health Care Tax Credit, Health Insurance, Medical Expenses

Medical expenses include amounts paid for the diagnosis, cure,
mitigation, treatment, or prevention of disease under IRC 213, as well as amounts paid for qualified long-term care services under IRC 7702B. You may deduct certain medical expenses that are paid during the year and that are not compensated for by insurance to the extent that the expenses exceed 7.5% of your adjusted gross income. This is done as an itemized deduction on schedule A of form 1040.

This is reinforced by the tax court case of Estate of Lillian Baral, Deceased, David H. Baral, Administrator, Petitioner v.
Commissioner of Internal Revenue, Respondent 137 T.C. No.1

According to IRC Sec. 7702B(c) the term qualified long-term care services means the necessary diagnostic, preventative, therapeutic, curing, treating, mitigating, and rehabilitative services and maintenance or personal care services required by a chronically-ill individual and provided pursuant to a plan of care prescribed by a licensed health care practitioner.

A chronically-ill individual means any individual who has been certified by a licensed health care practitioner as, among other conditions, requiring substantial supervision to protect the individual from threats to health and safety due to severe
cognitive impairment.

A licensed health care practitioner means any physician,
registered professional nurse, licensed social worker, or other individual who meets requirements prescribed by the
secretary.

No comments , , ,

Medical Expense Deduction Allowed for Lactation Supplies

October 6, 2011 Medical Expenses

Under Internal Revenue Code §213 an expense is considered for medical care if it is paid for the diagnosis, cure, mitigation, treatment or prevention of disease. It is deductible on the taxpayer’s Schedule A, subject to 7.5 percent of adjusted gross income for the year. However under Reg. §1.213-1(e)(1)(ii), expenses incurred for items that are merely beneficial to the general health of an individual are not deductible.

The IRS has concluded that breast pumps and supplies that
assist in lactation are deductible as medical expenses under §213
because, like obstetric care, they are for the purpose of affecting the structure or function of the body of lactating women. In addition, amounts reimbursed for these expenses under a flexible spending arrangement (FSA), an Archer medical savings account (Archer MSA), a health reimbursement arrangement (HRA) or a
health savings account (HSA) are not income to the taxpayer.

No comments ,

IRS Guidance on Qualified Long Term Care Insurance Contracts

August 29, 2011 Dependent, Health Insurance, Medical Expenses, Tax Guidance & Preparation

IRS Notice 2011-68 provides interim guidance on the federal income tax treatment of annuity and life insurance contracts with a qualified long-term care insurance (QLTC) feature. The guidelines address the application of certain changes to the federal income tax rules governing annuity and life insurance contracts as well.

All taxpayers are invited to provide comments for final regulations on or before November 9, 2011 which will be made available for public viewing.  There are 3 ways to submit comments.  Which ever way chosen should contain a reference to this Notice 2011-68.

1. Via US Mail to:CC:PA:LPD:PR (Notice 2011-68), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.

2. Via email to: Notice.Comments@irscounsel.treas.gov - Include “Notice 2011-68” in the subject line.

3. Hand-delivered Monday through Friday between the
hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Notice 2011-68), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave., NW, Washington, DC 20224.

If you have any questions the principal author of this notice is Rebecca L. Baxter of the Office of Associate Chief Counsel – Financial Institutions & Products. She can be reached at (202) 622-7117

No comments ,

Personal Expenses V. Deductible Medical Expenses

August 23, 2011 Medical Expenses

Generally you can deduct expenses paid for medical care for yourself, your spouse and your dependents to the extent the total
expenses for the year exceed 7.5 percent of your adjusted gross income and you itemize your deductions (Schedule A). IRS Pub. 502, Medical and Dental Expense, has valuable information on the topic.

Medical care essentially according to the IRS is the amount paid for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting a structure or function of the body. Deductible medical care expenses from the perspective of the IRS are limited to those expenses incurred for the prevention or alleviation of a physical or mental defect or illness.

According to Reg. §1.213-1(e)(1)(ii) taxpayers cannot deduct personal, family or living expenses as medical care if the expense is merely beneficial to the general health of an individual and not for actual medical care. In order to claim an expense is for medical care you must establish the factors that indicate an otherwise personal expense is actually for medical care by carefully documenting and preserving the following:

• Motive or purpose for making the expenditure;
• Physician’s diagnosis of a medical condition and recommendation of the item as treatment or mitigation;
• The relationship between the treatment and the illness;
• The treatment’s effectiveness;and
• The proximity in time to the onset or recurrence of a disease.

Also you need to prove that you would not have paid the expense had it not been for the disease or illness. According to the Tax Court case of the Commissioner v. Jacobs, 62 T.C. 813 (1974) if you would have paid the expense regardless of a medical condition, no medical expense deduction is allowed.

According to IRS Revenue Rule 55-261 the fees paid to a health facility where you exercise may be deductible as medical expenses if a physician prescribes the treatments and provides a statement that the treatments are necessary for the alleviation of a physical or mental defect or illness. In addition according to IRS Revenue Rule 79-151, in order to deduct a fee for participation in a weight-loss program as a medical expense, it must be for the purpose of curing a specific ailment or disease, and not simply to improve one’s appearance, general health or sense of well being. Last IRS Revenue Rule 2002-19 states that amounts an individual pays for participation in a weight loss program to treat a specific disease, such as obesity or hypertension, as diagnosed by a board certified physician are considered legitimate expenses for medical care that a taxpayer can deduct.

In response to a very specific question I was asked today it appears you may be able to deduct gym fees as a medical expense if you can establish that:

• A physician diagnosed you with a specific disease;
• You use the gym to treat the specific disease; and
• You would not incur the gym fees except for the specific disease.

So yes I think I can successfully defend a return with that issue on appeal but please don’t expect me to sign a return of that nature. I have way to many headaches as it is.

No comments ,

Medical Expense Deductions

July 11, 2011 Medical Expenses, Self Employ, Small Business, Sole Proprietor, Tax Deductible Expenses, Tax Guidance & Preparation

Many medical costs are deductible including the cost of treatment to alleviate conditions or diseases and the cost of prescriptions and certain diagnostic services. Additional deductible medical expenses include:

  • Capital expenses for special equipment installed in, or improvements made to, a home that provides a medical benefit; these include wider doorways, entrance ramps, modified bathroom or kitchen equipment, and swimming pools for therapeutic purposes.

  • Cosmetic surgery, if necessary to improve a deformity related to a congenital abnormality, accident, or disease.

  • Dental treatments, including braces and dentures.

  • Meals and lodging, if the stay is at a hospital or similar institution to obtain medical care.

  • Orthopedic shoes (extra cost over regular shoes).

  • Prosthetic limbs.

  • Oxygen and equipment used to relieve medical breathing problems.

  • Smoking cessation programs and prescribed drugs to alleviate nicotine withdrawal.

  • Visual alert systems for the hearing-impaired.

  • Medical aids such as wheelchairs, hearing aids, crutches, needles, and other diagnostic devices such as blood sugar kits.

  • Guide dogs or other animals used by taxpayers who are visually or hearing impaired or are otherwise disabled.

  • Weight loss programs as treatment for a specific disease; obesity is a disease as long as diagnosed by a physician. The Tax Court has allowed the extra cost for special diets over the cost of a normal diet when prescribed by a physician to alleviate a specific medical condition.

  • Alcohol and drug addiction treatment, meals, and lodging at a therapeutic center for addictions.

  • Tuition for day-camp programs designed for children with disabilities.

  • The cost of hand controls for a vehicle for the physically handicapped, or the extra cost to design a vehicle to hold a wheelchair.

  • Detachable items such as air conditioners, heaters, humidifiers, and air cleaners used for the benefit of a sick person or for the relief of allergies or other respiratory ailments.

  • Laser eye surgery that meaningfully promotes the proper function of the eyes; vision correction with eyeglasses or contact lenses is also allowed.

  • Out-of-pocket transportation expenses for medical reasons

Medical expenses that are not deductible include the following:

  • Maternity clothes.

  • Teeth-whitening.

  • Diaper services (unless needed to relieve the effects of a particular disease).

  • Dancing lessons, even if recommended by a physician.

  • Funeral expenses.

  • Exercise programs to improve general health, even if recommended by a physician.

  • Marijuana, even if legal under state law when prescribed by a physician in the state where the taxpayer lives.

  • Health club dues (unless they are related to a specific medical condition).

  • Vitamins and other nutritional supplements (unless prescribed by a physician as treatment for a specific, diagnosed medical condition.

For an extensive list of allowable medical expense deductions see IRS Publication 502, Medical & Dental Expenses.

You may only deduct the amount of expenses in excess of 7.5% of adjusted gross income.  If deductions on Schedule A (including medical expenses) are not more than the standard deduction, they may not prove helpful on the federal return, though in many states they may become advantageous.

Medical expenses are reduced by payments from insurance or other sources.  Payments received for the permanent loss or use of a member or function of the body, for loss of earnings related to a physical injury, or damages due to personal injury or sickness do not reduce expenses.

Publication 4345, Settlements – Taxability, reviews those payments which may be taxable.

The one thing that many people over look is that excess reimbursements for medical expenses may need to be included in income.   If you are reimbursed the amount up to the deduction must be included in income if it was previously deducted.

Taxpayers may also be able to claim expenses for themselves as well as other qualifying persons.  A good example of this might be expenses for a parent for whom over half the support is provided.

No comments , , , ,

No Medical Expense Deduction Allowed for Precautions to Treat Future Disease

May 19, 2011 Medical Expenses

Under §213, a taxpayer is allowed to deduct the cost of preventing, treating, curing, mitigating, and diagnosing a disease that is existing or imminently probable for themselves or a family member.

Doctors now can store cord blood of an infant that contains stem cells that may be used to treat or cure a disease. However, the cost to collect or store umbilical cord blood of an infant is not a deductible medical expense if the disease that they are storing the blood for is not imminent. The cost of the collection and storage based on possible future diseases that may arise in the child are nondeductible. If the disease for which the cord blood is stored is imminent, the cost to store the blood can be determined to be a deductible medical expense relating to the prevention of an imminent medical disease.

No comments

Medical Expenses Paid for a Parent Are Deductible

April 15, 2011 Medical Expenses

Report the deduction on the Schedule ‘A’ – even if the parent did not meet the gross income requirements for the dependency exemption, the parent will still meet the definition of a dependent for purposes of medical expenses paid according to CFR 26 Section 213(a).

To answer a specific question, a parent’s W-2 earnings will not prevent you from claiming a deduction on your taxes for the amount you paid for necessary medical expenses on behalf of your parent. A taxpayer’s medical expenses include expenses paid for a person who meets the §152 definition of a dependent. However, §213(a) expands the definition to also include:

  • a dependent child who filed a joint return with a spouse,

  • a relative who would have qualified except for exceeding the income level

  • anyone who would have qualified as the taxpayer’s dependent but was claimed as a dependent on another person’s return.

  • Medical expenses paid for a dependent claimed under a multiple support agreement are also deductible [Reg. §1.213-1(a)(3)].

John R. Dundon, EA – 720-234-1177 – jddundon@comcast.net – http://prep.1040.com/jd/ – Enrolled with the United States Department of Treasury to Practice before the IRS – Enrolled Agent # 85353. Under contract with the IRS as a Certified Individual Taxpayer Identification Number (ITIN) Acceptance Agent – I am a Federally Authorized Tax Practitioner (USC 31 Section 330 + IRC 7525a.3.A) regulated under US Treasury Cir. 230.

http://prep.1040.com/jd

http://johndundon.taxtutor.com

jddundon@comcast.net
720-234-1177

No comments

Breast Pumps and Supplies to Assist Lactation Are Now, Finally, Considered Tax Deductible Medical Expenses by the IRS – Announcement 2011-14

February 10, 2011 Medical Expenses

The Internal Revenue Service has concluded that breast pumps and supplies that assist lactation are medical care under § 213(d) of the Internal Revenue Code because, like obstetric care, they are for the purpose of affecting a structure or function of the body of the lactating woman.  Therefore, if the remaining requirements of § 213(a) are met (for example, the taxpayer’s total medical expenses exceed 7.5 percent of adjusted gross income), expenses paid for breast pumps and supplies that assist lactation are deductible medical expenses.

Amounts reimbursed for these expenses under flexible spending arrangements, Archer medical savings accounts, health reimbursement arrangements, or health savings accounts are not income to the taxpayer.

The IRS will revise Publication 502, Medical and Dental Expenses, to include this information.  For additional information concerning this announcement, contact Amy S. Wei of the Office of Associate Chief Counsel (Income Tax and Accounting) at (202) 622-7900

No comments
« Older Entries