It is common knowledge that taxpayers may deduct qualified medical expenses for themselves and their dependent children. There are, however, other opportunities to deduct medical expenses that are not so widely known. One of those is the deduction of medical expenses that a taxpayer pays on behalf of others, such as elderly family members and domestic partners, even if they are not claimed as dependents. There are also several categories of medical deductions that are commonly overlooked.
Relaxed Definition of “Dependent” for Medical Deductions
Allowable deductions for medical expenses paid are defined under Sec. 213(a):
There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), to the extent that such expenses exceed 7.5 percent of adjusted gross income. [Emphasis added.]
Because of the parenthetical “without regard to” reference to Secs. 152(b)(1), (b)(2), and (d)(1)(B), taxpayers can deduct qualifying medical expenses paid on behalf of individuals who could be claimed as dependents except for the fact they (1) claim dependents of their own, (2) file a joint return, or (3) receive gross income in excess of the exemption amount, respectively.
The child of an ill parent, for example, can take a deduction for paying the parent’s health care costs provided all other dependency requirements were met, even though the parent files a joint return and has gross income greater than $3,400. Further, Sec. 152(d)(2)(H) provides that unrelated members of a taxpayer’s household may also qualify as dependents. Thus, there are circumstances under which, for example, the medical expenses of a domestic partner might be deductible. However, the dependency requirements for unrelated parties are more strict than those for family members; an unrelated person must both share the same principal place of abode as the taxpayer and be a member of the taxpayer’s household for the taxpayer’s entire tax year.
Aside from the commonly considered doctor and hospital costs, prescription drugs, and health insurance premiums, there are many other qualifying expenses that can create a larger-than-expected medical deduction for the taxpayer.
Long-Term Care Costs
The treatment of a chronic illness or disability can be extremely costly. Fortunately, certain services that would otherwise be nondeductible become qualified long-term care costs. The deductibility rules for the following long-term care services are covered in Sec. 7702B.
- Long-term care insurance premiums subject to age-related limits.
- Maintenance and personal care services, including meal preparation and housekeeping, if the services are rendered to assist with daily activities of living that chronically ill individuals are unable to perform on their own.
- Meals and lodging for an in-home caregiver if the caregiver is unrelated or is licensed.
- Nursing homes, assisted living facilities, and dementia facilities. All reasonable costs—including those for meals, lodging, and personal care—are deductible if the patient is admitted for medical reasons. If the patient is allowed in simply for custodial reasons, only the medically related components of costs are deductible.
Commonly Overlooked Deductions Within Sec. 213
- Nonelective cosmetic surgery (i.e., promotes proper function of the body; prevents or treats illness or disease).
- Dental work, if not purely cosmetic.
- Hearing aids and prescription eyeglasses, including the cost of examinations and prescriptions.
- Non-physician-provided medical services if related to a medical condition, including nontraditional treatments, such as acupuncture and Christian Science healing practices.
- Psychotherapy and psychiatric counseling.
- Smoking-cessation programs, including prescription drugs to alleviate nicotine withdrawal.
- Transportation to and from medical treatment, including taxis, public transportation, a taxpayer’s private car, tolls, and parking.
- Weight-loss programs for treatment of a physician-diagnosed disease.
Joel E. Ackerman, CPA, MST is with Holtz Rubenstein Reminick LLP, DFK International/USA Melville, NY.
Unless otherwise noted, contributors are members of or associated with DFK International/USA.
If you would like additional information about these items, contact Mr. Ackerman at (631) 752-7400 x262 or firstname.lastname@example.org.