In this article, a regular feature in the Journal of Accountancy, the author begins by explaining that, although most people know that they can deduct medical expenses on their taxes for themselves, spouse, and dependents, they are usually unaware that other medical expenses are deductible as well. These include medical expenses for elderly parents and domestic partners, even if they are not considered dependents. I am intrigued by this because, on its face, it seems contradictory to the tax code.
These additional amounts which can be added to the medical expense deduction are made possible by a relaxed definition of “dependent”. In the case of elderly/sick parents, the deductions are allowed even though these people may be able to claim other dependents on their tax returns or file joint returns. These are the only two things keeping the taxpayer paying the medical expense from claiming their parents as dependents. Also, in some cases, unrelated members of the household may have their medical expenses become deductible by qualifying as dependents. However, in the case of unrelated individuals, the dependency requirements are much stricter. The author explains it this way: “the dependency requirements for unrelated parties are stricter than those for family members; an unrelated person must 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.”
In addition to overlooking expenses spent on other members of the family, the Tax Adviser suggests taking a closer look at what the taxpayer incurs in long-term care costs. Here are four expenses which normally are not deductible:
- 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 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.
And just in case you need more expenses to meet the floor in regards to medical expenses, he also provides 8 commonly overlooked medical expenses:
1. Nonelective cosmetic surgery (that is, promoting proper function of the body or preventing or treating illness or disease).
2. Dental work, if not purely cosmetic.
3. Hearing aids and prescription eyeglasses, including the cost of examinations and prescriptions.
4. Non-physician-provided medical services if related to a medical condition, including nontraditional treatments, such as acupuncture and Christian Science healing practices.
5. Psychotherapy and psychiatric counseling.
6. Smoking-cessation programs, including prescription drugs to alleviate nicotine withdrawal.
7. Transportation to and from medical treatment, including tolls and parking.
8. Weight-loss programs for treatment of physician-diagnosed disease.
Many people think that cannot deduct additional medical expenses paid out of pocket despite their enrollment in health insurance or discount health programs. For a taxpayer in my situation, this is crucial information because I do not have health insurance and will likely be enrolling in a discount program. Everything I end up paying out of pocket that is not covered by the Veteran’s Administration should be carefully examined and checked against the list of commonly overlooked expenses.
I think this was a good overview of commonly overlooked medical expenses for deduction. Not only was the author clear and concise about the information, but listing the overlooked expenses in a numbered lists just makes it easier to understand. Even though this article came from the Journal of Accountancy, it is clear to me that the average taxpayer would be able to understand the article without having their CPA on speed-dial.
And if the reader desires more information, the Tax Advisor tells the reader to read “Opportunities to Claim Health Care Expenses as Deductions,” by Donald L. Williamson, CPA, J.D., in the October 2007 issue of The Tax Adviser. I think the addition of this article would serve to clear up any points which are still unclear about what is and what is not deductible.
According the text for class, medical expenses are deductible only if they are paid on behalf of the taxpayer, his or her spouse, and their dependents. Deductibility, therefore, depends on dependency status. Since this is only a general statement about medical expenses, it pays to do more research as to who qualifies as a dependent.
If a taxpayer does have health insurance, but also deals with sick/elderly parents, I believe they would benefit the most from this information without feeling like they are just throwing money away in order to take care of their parents or another dependent with a chronic illness. Unfortunately, I expected this article to be a little more technical and aimed at those who have studied taxes and accounting since it is in the Journal of Accountancy – a publication aimed at CPAs. For the student of taxes, this was good. For the CPA, it may be a little elementary – unless I am overestimating the average CPA!