More Ways to Boost Medical Deductions

A small percentage of taxpayers deduct medical expenses. That is partly because of the deduction limits. It also is because many people do not know all the costs that qualify for medical expense deductions.

Medical expenses can be deducted only by those who itemize expenses on Schedule A. They deduct only the medical and dental expenses that exceed 7.5% of adjusted gross income. If AGI is $100,000, only the medical expenses above $7,500 are deducted from AGI.

Because of the limits, it is important for taxpayers to know and track all deductible medical expenses. In the August 2007 visit we covered some of the basics for deducting medical expenses. Here are some more little-known deductible medical expenses.

• Nonelective cosmetic surgery when it promotes proper functioning of the body or prevents or treats an illness or disease.

• Dental work that is not purely cosmetic.

• Hearing aids and prescription eyeglasses including the cost of examinations and prescriptions.

• Medical services not provided by physicians, including those involving nontraditional treatments or healers. Such treatments include acupuncture, chiropractic, and Christian Science healing practices.

• Psychotherapy and psychiatric counseling.

• Smoking-cessation programs, including prescription drugs to alleviate nicotine withdrawal.

• Weight loss programs when they are for treatment of a physician-diagnosed disease.

• Transportation to and from medical treatment, including a standard mileage deduction at 18 cents per mile, tolls, and parking.

• Long-term care insurance premiums, with the maximum deduction determined by the insured’s age.

• Maintenance and personal care services, such as meal preparation and housekeeping, provided to someone who is chronically ill and unable to perform basic activities of daily living. Meals and lodging for an in-home caregiver are deductible if the caregiver is unrelated or is licensed.

• The expenses of a long-term care facility if the person is admitted primarily for medical reasons. If the person is admitted for custodial care, the expenses related only to medical care are deductible. See our August 2007 issue for more details on deductions for long-term care.

• Premiums for Medicare Part B and the Medicare Part D prescription drug program.

• If paid by credit card, medical expenses are deducted in the year they are charged to the card.

• Capital expenditures and improvements for a home are deductible under certain conditions. The main purpose of the improvement must be medical care or treatment of a disease or medical condition. The expense is not deductible to the extent it increases the value of the home.
  Expenses to accommodate a home to a disability do not usually increase the value of the home and are fully deductible, such as entrance or exit ramps, widening doorways and hallways, installing railings or support bars to bathrooms, and lowering or moving kitchen cabinets and electric outlets.

• Diagnostic devices such as blood sugar monitors.

• Laser eye surgery or radial keratotomy.Some expenses people want to deduct as medical expense are not deductible under the tax law. Here are some of the frequently-denied deductions.
• Cosmetic surgery that is medically unnecessary. This includes surgery that is directed at improving appearance and does not treat an illness or disease or promote the proper function of the body.
• Health club dues are deductible only to the extent that they pay for weight loss classes or another specific medical condition. Amounts paid to improve general health or relieve mental or physical discomfort not related to a particular medical condition are not deductible.

Details on deducting medical expenses are in IRS Publications 17 and 502.