Review of acceptable medical expenses for tax purposes
It may be hard to go a complete year without spending money for health purposes. However, not everything we consider “healthful” counts as a medical expense! Generally speaking, the IRS only considers expenses specifically related to the medical community to be acceptable, and the states follow suit. That is, joining a gym, taking vitamins, and even putting Band-Aids® on boo-boos are not deductible for tax purposes.
What kinds of expenses count?
In Publication 502, page 2, the IRS defines medical expenses as “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease…and payments for legal medical services rendered by physicians, surgeons, dentists and other medical practitioners…to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.” (Yes, that is a direct quote from the IRS publication. Apparently, someone has a sense of humor.)
What kind of expenses count? – Let’s try that again, in English!
Out-of-pocket expenses for doctors and prescriptions, vision exams and glasses/contacts, hearing exams and hearing aids, dentists and false teeth, orthodontists and braces. Also seeing eye dogs, mental health providers, hospital stays, nursing home services, wheelchairs, and alterations to your home to accommodate the wheelchair. Supplemental insurance and long-term care insurance (with certain limitations). Additionally, you can take an allowance for transportation to obtain medical care – this includes taxis and buses as well as mileage, tolls, and parking for your own car.
Don’t try to include health insurance paid for by your employer, even though this is now stated on your W-2. If you contribute to your health insurance, it is probably considered pre-tax, so you can’t include it. Be careful! However, if you pay anything post-tax and out-of-pocket toward your health insurance, such as supplemental insurance, COBRA payments, or a vision or dental policy, it will count.
You can only include the expenses you actually pay during the tax year. For instance, if you incur a large medical bill on December 29, but you don’t pay it until the following year, you take the expense in the year you pay it, and not the year you incur it.
If you get a reimbursement for expenses you originally paid yourself, you have to subtract it out, even if the reimbursement is for a prior year. (Don’t amend the prior year, just subtract it in the current year).
You can only take expenses paid for yourself and your dependents. This means, if you pay for your neighbor’s new glasses, you gave a personal gift. Neither of you get to take the expense.
These lists are not complete! I have tried to provide a general informational overview, and many people have complex personal situations. (I really can’t give tax advice in a blog.) If you have questions, we should talk about this in more detail.