- Potential medical deductions
- Medical dependent
- Divorced parents
- Medical AGI limitations
Taxpayers are allowed a deduction for medical expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, the taxpayer’s spouse, or a dependent.
Alcoholism and drug addiction are treated as medical ailments for tax purposes. People with addictions often cannot quit on their own. Addiction is an illness that requires treatment. Generally, treatment expenses are tax deductible as an itemized deduction medical expense. Possible deductible expenses include the costs of the following:
- Prescribed medications
- Laboratory testing
- Psychological services
- Treatment programs
- Inpatient treatment at a therapeutic center for alcoholism or drug abuse, including meals and lodging furnished as necessary incident to the treatment
- Behavioral therapies
To claim these expenses for someone other than the taxpayer or a spouse, the person must have been a dependent either at the time that the medical services were provided or at the time that the expenses were paid.
The qualifications for a medical dependent are less stringent than those for a regular dependent. A person generally qualifies as a dependent for purposes of the medical expense deduction if:
- That person lived with the taxpayer for the entire year as a member of the household (temporary absence to obtain medical treatment is an exception) or is related to the person,
- That person was a U.S. citizen or resident or a resident of Canada or Mexico for some part of the calendar year in which the tax year began, and
- The taxpayer provided over half of that person’s total support for the calendar year. Medical expenses of any person who is a dependent may be included, even if an exemption for him or her cannot be claimed on the return.
Thus, the dependent’s age and income are not limiting factors for purposes of determining whether an individual is a dependent for purposes of deducting medical expenses.
For example, suppose an adult child has an addiction problem, and even though the child is an adult and generates an income, a parent may still be able to deduct medical expenses that he or she pays for the adult child if the three requirements above are met. The parent must pay the medical service providers directly and not just give the money to the dependent to pay the bills.
In the case of divorced parents, if either parent meets the regular dependency qualifications, then each parent can deduct the medical expenses each paid for the child. But consider the AGI limitations, discussed below, that might preclude any deduction for one of the parents, and plan payments accordingly.
Another issue related to medical expenses is that a taxpayer must itemize deductions in order to claim them, and medical deductions are only allowed as an itemized deduction to the extent that they exceed 10% of the taxpayer’s AGI. If the taxpayer or spouse is age 65 or older, that limitation is reduced to 7.5% of the taxpayer’s AGI.
As you can see, these and other tax rules related to medical deductions can become complicated. If you need assistance in planning medical expenditures for maximum tax benefits or determining whether you can deduct certain expenses, please call.