Making Your Medical Deductions Count
By Alan L. Olsen, CPA, MBA (tax)
Greenstein Rogoff Olsen & Co. LLP
April 15th is almost here and if you are owing tax it may pay to take
a second look at that return to see if you claimed all medical deductions you are
entitled to. Your diligence in keeping track of expenses will pay off.
IRS Publication 502 has a complete listing of all medical costs deductible.
Following are some of the commonly overlooked medical deductions.
The medical expense deduction is limited to the amount by which the annual medical
expense exceeds 7.5% of your adjusted gross income. Included in this
category are unreimbursement amounts paid for health insurance, hospital, and nursing
care, doctor’s and dentists’ visits, prescription medications, eyeglasses, hearing
aids, and long-term care insurance premiums and services.
You can also deduct home improvements related to medical expenses. These expenses
may include, but are not limited to the following:
Only reasonable costs to accommodate a home to a disabled condition are considered
medical care. Additional costs for personal motives, such as for architectural or
aesthetic reasons, are not medical expenses.
- Constructing entrance or exit ramps for your home.
- Widening doorways at entrances or exits to your home.
- Widening or otherwise modifying hallways and interior doorways.
- Installing railings, support bars, or other modifications to bathrooms.
- Lowering or modifying kitchen cabinets and equipment.
- Moving or modifying electrical outlets and fixtures.
- Installing porch lifts and other forms of lifts (but elevators generally add value
to the house).
- Modifying fire alarms, smoke detectors, and other warning systems.
- Modifying stairways.
- Adding handrails or grab bars anywhere (whether or not in bathrooms).
- Modifying hardware on doors.
- Modifying areas in front of entrance and exit doorways.
- Grading the ground to provide access to the residence.
An often overlooked medical deduction is the medicare Part A and Part B premiums
voluntarily paid by Social Security recipients. Also, if you travel to medical
conferences relating to a dependent’s chronic disease, smoking cessation programs
or travel to obtain medical treatment, you may be able to deduct the cost of your
transportation, as well as food and lodging.
You can include in medical expenses wages and other amounts you pay for nursing
services. The services need not be performed by a nurse as long as the services
are of a kind generally performed by a nurse. This includes services connected with
caring for the patient's condition, such as giving medication or changing dressings,
as well as bathing and grooming the patient. These services can be provided in your
home or another care facility.
Generally, only the amount spent for nursing services is a medical expense. If the
attendant also provides personal and household services, amounts paid to the attendant
must be divided between the time spent performing household and personal services
and the time spent for nursing services. However, certain maintenance or personal
care services provided for qualified long-term care can be included in medical expenses.
You can also include in medical expenses part of the amount you pay for that attendant's
meals. Divide the food expense among the household members to find the cost of the
attendant's food. Then divide that cost in the same manner as in the preceding paragraph.
If you had to pay additional amounts for household upkeep because of the attendant,
you can include the extra amounts with your medical expenses. This includes extra
rent or utilities you pay because you moved to a larger apartment to provide space
for the attendant.
Employment taxes. You can include as a medical expense social security
tax, FUTA, Medicare tax, and state employment taxes you pay for a nurse, attendant,
or other person who provides medical care. If the attendant also provides personal
and household services, you can include as a medical expense only the amount of
employment taxes paid for medical services.
Health Insurance Costs for Self-Employed Persons
If you were self-employed and had a net profit for the year, were a general partner
(or a limited partner receiving guaranteed payments), or received wages from an
S corporation in which you were a more than 2% shareholder (who is treated as a
partner), you may be able to deduct, as an adjustment to income, all of the amount
paid for medical and qualified long-term care insurance on behalf of yourself, your
spouse, and dependents.
The insurance plan must be established under your trade or business, and you cannot
take this deduction to the extent that the amount of the deduction is more than
your earned income from that trade or business.
You cannot take this deduction for any month in which you were eligible to participate
in any subsidized health plan maintained by your employer or your spouse's employer.
This rule is applied separately to plans that provide long-term care insurance and
plans that do not provide long-term care insurance.
If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction
Worksheet in the Form 1040 instructions to figure the amount you can deduct. But
if any of the following applies, do not use the worksheet.
- You had more than one source of income subject to self-employment tax.
- You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion.
- You are using amounts paid for qualified long-term care insurance to figure the deduction.
Feel free to contact us at www.groco.com if you have any questions on how to maximize
your medical deductions.