The IRS surprised tax advisors and generated a lot of headlines last spring by expanding tax write offs for weight loss programs. In the past, the IRS had ruled that no part of the cost of weight loss programs was deductible. The new ruling reverses that, expanding the medical expenses that are potentially deductible by about 40 million Americans.
No change was made in the IRS’s basic rules for deducting medical expenses. To be deductible as a medical expense, an expenditure must have been made primarily to prevent or alleviate a specific physical or mental defect or illness. Expenses are not deductible when they merely improve or maintain the general health of an individual.
The change is that the IRS concluded that the medical profession now recognizes obesity as a specific illness or disease, so the tax law also should. Therefore, the IRS ruled in Revenue Ruling 2002-19 that the cost of weight reduction programs can be deductible when an individual is diagnosed as being obese and a doctor recommends weight loss. Previously, the IRS recognized only illnesses that might be related to obesity, such as high blood pressure, as generating deductible medical expenses.
That’s enough of the lawyer talk. The real question is: which expenses can be deducted as a medical expense?
The cost of food, even special food, generally is not deductible as a medical expense. That’s because no deduction is allowed for personal living expenses. Food is a personal expense, because everyone has basic nutritional requirements that must be satisfied. A food expense is deductible only when the food alleviates or treats an illness, is not part of the normal nutritional needs, and a physician substantiates the need for the food. It is unlikely that food in a weight reduction program could qualify for deductions.
The deductibility of the cost of an exercise program, such as membership in a health club or purchase of exercise equipment, isn’t clear and was not addressed by the IRS. One could conclude that exercise and its related costs are part of a weight reduction plan to treat obesity. That conclusion might lead to a situation in which one person deducts the cost of a health club because he is obese but a healthy person does not deduct the same costs. The healthy person, however, can argue that he exercises to prevent obesity, and prevention of a disease generates deductible medical expenses. The IRS didn’t address these issues, so taxpayers are on their own for now.
Some other expenses should be deductible. Classes and meetings that are part of an obesity reduction program can be deducted. A portion of visits to “health spas” also should be deductible, though the IRS wasn’t forthcoming with details. These facilities tend to offer a variety of services. There are likely to be classes, individual counseling on exercise and nutrition, exercise facilities, exercise programs, and special meals. Medical tests – such as blood and stress tests – often are available.
While the facilities tend to charge a lump sum, obese individuals should ask for itemized bills. Once a doctor says a person is obese, expenses clearly related to weight loss should be deductible. That should include the cost of classes and seminars, individual counseling on weight loss, and medical tests. The food should not be deductible. Expenses related to the use of the exercise facilities are up in the air, as we’ve already discussed.
The cost of lodging at the spa and travel to it were not addressed by the IRS in the recent ruling.
Under longstanding rules, transportation and lodging for out of town medical care are deductible when the trip is primarily for and essential to medical care. The IRS is likely to conclude that travel to a resort or special facility is not essential to treating obesity.
The IRS should issue rulings or regulations in the future to clarify some of these questions.
Once an expense qualifies as being deductible, the taxpayer’s work is not over. Medical expenses are deductible only for taxpayers who itemize expenses on Schedule A and only for medical expenses that exceed 7.5% of adjusted gross income. That means you need other itemized expenses such as mortgage interest or high state and local taxes plus a fair amount of medical expenses to qualify for deductions. Also, expenses are deductible only to the extent they are not reimbursed by insurance or other means.
If a flexible spending account for medical care is offered through an employer, weight reduction expenses for obese individuals now are eligible to be paid from that account.
Taxpayers should be sure that a doctor diagnoses them as obese before incurring any weight loss expenses. The new ruling applies to any tax year that still is open. Tax returns generally can be amended for up to three years after the original was filed, so people who incurred significant weight reduction expenses in the past might want to consider filing amended returns for past years that still are open.