Make the Most of Your Medical Deductions

Medical expenses are deductible can only to the extent that, in total, they exceed 7.5% of Adjusted Gross Income the IRS and court decisions have expanded the definition of medical costs that can he deducted from personal income taxes. Plan ahead to take advantage of as many medical expenses as possible. Medical deductions can be taken for the costs of diagnosis, the treatment or prevention of a disease or for affecting any structure or function of the body.

Treatment must be specific and not just for general health improvement. As an example the IRS successfully denied taxpayers deductions for the cost of weight-control programs that were designed to improve general health, not to treat a specific ailment or disease. On the other hand, a person with a health problem specifically related to being overweight, such as high blood pressure, might be allowed the deduction. However, if an employer tells an overweight employee to lose weight or leave, and the boss has previously enforced such a rule, the plump employee can deduct the cost of a weight-loss program, because money a taxpayer spends to help keep his/her job is deductible. The IRS says it will allow a deduction if two physicians prescribe a weight-reduction program for the treatment of hypertension, obesity or hearing problems.

The same applies to home improvements. The cost of a swimming pool would be deductible if it is specifically necessary for a person who has polio, as would the cost of an elevator for a heart patient. But only the actual cost (over the increase in value to the property) is deductible. The IRS makes taxpayers subtract from the cost of an improvement the amount that the feature adds to the value of the residence. So, if a swimming pool costs $10,000 but adds $4,000 to the value of the property, only $6,000 would be tax deductible. To determine the value, have the property appraised before and after the improvement. (The appraisal fee is tax deductible as a miscellaneous itemized deduction.)

Medical or business? Because medical costs are deductible only after they exceed 7.5% of a taxpayer's Adjusted Gross Income, it is tempting to declare them as business expenses. However, the IRS rarely allows those business deductions. But there is a sizable gray area. A professional singer was once not allowed to deduct the cost of throat treatments as a business expense, but an IRS agent did allow a deduction for a dancer who found it necessary to her career to have silicone breast implants.

Medically unproven treatment is generally deductible, since the IRS has taken the position that it cannot make judgments in the medical field. A deduction for the cost of a food processor for a special diet consisting of vegetables or a special vitamin-enriched diet, even though the taxpayer is diabetic is not allowed.

Deductions for medical expenses of married children are sometimes possible, provided you contributed more than half of the child's support. For example if the daughter of a highly paid executive ran up medical hills of more than $5,000 and she married later that year and filed a joint return with her husband. In a case like this the father would be allowed to deduct the cost of treatment on his return for the year, even though the daughter didn't qualify as a dependent.

Consult with your tax advisor but don't hesitate to take these deductions!