Tax Tips for Medical Expenses

Presented for Allied Services Integrated Health System

March 11, 2014

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Medical Expenses

• Medical expenses are costs of – Diagnosis– Cure– Mitigation– Treatment– Prevention of disease

• Medical expenses are not costs– Merely beneficial to general health, i.e. vitamins

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Medical Expenses

• Medical expenses include costs for– Legal medical services rendered by physicians,

surgeons, dentists, and other medical practitioners

– Equipment, supplies, and diagnostic devices

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Medical Expenses

• Only include the expenses paid in the current year, regardless of when the services were provided– If paid by check, the date the check is mailed or

delivered– If paid by credit card, the date the credit card is

charged• If you didn’t claim expense in prior year,

amend return within 3 years

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Medical Expenses

• Do not deduct medical expenses that were paid by insurance companies or other sources

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Medical Expenses

• You can include medical expenses paid for yourself, your spouse, or your dependent– For a spouse - must have been married either at

the time your spouse received the medical services or the time you paid the medical expense

– For a dependent – must have been a dependent either at the time medical services were provided or paid

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Medical Expenses

• Dependent definition expanded for medical expenses, taxpayer unable to claim exemption but can claim medical expenses– Non-dependent child– Married child– Parent– Taxpayer must provide more than 50% support– May use multiple support agreement

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Medical Expenses

• Capital expenses– Include expenses paid for special equipment

installed in a home, or improvements if their main purpose is medical care

– Permanent improvements that increase value may be partly deductible

– Improvements made to accommodate home for disabled condition usually do not increase the value of a home

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Medical Expenses

• Miscellaneous medical expenses include– Acupuncture– Braille books and magazines– Car modifications – hand controls, wheelchair

holder– Contact lenses, including saline solution– Guide dog or other service animal– Special education for children with learning

disabilities

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Medical Expenses

• Miscellaneous medical expenses do not include– Cosmetic surgery– Dancing lessons– Diaper service– Funeral expenses– Illegal operations and treatments– Nonprescription drugs and medicines

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Medical Expenses

• Qualified long-term care services– Required by a chronically ill individual– Provided pursuant to a plan of care prescribed by

a licensed health care practitioner• Chronically ill individual if, within previous 12

months was certified that either is– Unable to perform 2 daily activities without

assistance for at least 90 days, or– Requires substantial supervision

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Medical Expenses

• Nursing homes, assisted living, and other long-term care facilities– Deductibility depends on needs and impairments

of the individual and the services provided by the institution

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Medical Expenses

• In-home health care costs– If services are of a kind generally preformed by a

nurse, wages and other amounts paid are deductible medical expenses, even if person is not a licensed nurse

– This does not apply to services provided by a relative unless licensed professional

• May qualify as household employees and be subject to employment taxes

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Medical Expenses

• Disabled dependent care expenses may qualify as either– Medical expenses– Work related expenses for the purpose of taking

a credit for dependent care (Form 2441)– You cannot deduct the expense and use it as

credit• Spouse or dependent who is unable to care

for themselves

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Medical Expenses

• Impairment-related work expenses– Necessary for you to do your work satisfactorily– For goods and services not required or used in

your personal activities– Not covered under other tax laws– Not subject to limitations (7.5% / 10% medical or

2% employee business expense)

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IRS Update – What’s New for 2013

• Beginning January 1, 2013, you can only deduct the part of medical and dental expenses that exceed 10% of your adjusted gross income if under age 65

• 7.5% adjusted gross income limitation still applies for individuals 65 or order

• Standard mileage rate for medical expenses is 24 cents per mile

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Contact Information

Edward A. Kollar, CPA, EA

ParenteBeard, LLC

46 Public Square, Suite 400

Wilkes-Barre, PA 18701

570-820-0113

ed.kollar@parentebeard.com