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As Medical Expenses Rise, Don't Miss Key
Deductions
There are plenty of horror stories about uncovered medical
expenses these days, and the truly horrifying part is that many
of them belong to people who actually have health insurance. But
any time you or a family member is facing a health crisis or an
unusual medical-related expense, it's best to check to see if
you might get a break from Uncle Sam.
A tax professional and a financial planner should be
consulted to determine whether there are any tax issues or any
ways to defer cost or save money at any part of the process. The
Internal Revenue Service lets you deduct medical costs as long
as they are more than 7.5 percent of your adjusted gross income
(AGI). That means if your AGI is $50,000, you can deduct only
those unreimbursed expenses that exceed $3,750.
Getting there requires some planning, which is why it's so
important to gather up every dime of unreimbursed medical,
dental and vision care expenses and review it carefully.
Here are things people often miss:
Medically related travel. The IRS evaluates the
standard cents-per-mile allowance each year for travel to and
from medical treatments. Between Jan. 1 and June 30, that rate was
19 cents per mile. Between July 1 and Dec. 31, the rate will
rocket to 27 cents per mile.
Insurance payments from already taxed income. This
includes the cost of long-term care insurance, up to certain
limits based on your age.
Uninsured medical treatments. This includes what you
spend for an extra pair of eyeglasses or set of contact lenses,
false teeth, hearing aids or artificial limbs.
Rehab treatment. What you pay for alcohol or
drug-abuse treatments can be noted on Schedule A.
Weight-loss to smoking cessation. If a doctor
prescribes it, you'll be able to deduct it.
Laser vision correction surgery. May be an allowable
expense to deduct on your current taxes.
Doctor-recommended equipment and related expenses. If
your doctor tells you that you need a humidifier installed on
your heating and air conditioning system to help your breathing
problems, you might be able to deduct all or part of the cost
for the device as well as the additional energy costs to run it.
Some medical education costs. If you, your spouse or
child have a chronic medical condition and you attend a
conference to learn more about it, you can count admission and
transportation expenses as a deduction, but not meals and
lodging.
If you're self-employed. You may deduct, as an
adjustment to gross income, the full cost paid for medical
insurance for you, your spouse and your dependents.
Lodging for out-of-town treatment. When accompanying a
minor dependent to out-of-town medical treatment, hotel bills
may be partially deductible.
Here are some less common expenses to watch:
Medically necessary home improvements or equipment. If
you do a home improvement or bring in special equipment that's
considered medically necessary for you, your spouse or your
dependents, you'll be able to deduct the cost. These may include
special entrance/exit ramps to your house, widening doorways,
modifying kitchens or bathrooms, or adding a chairlift for the
physically disabled. Because these improvements are not expected
to add to the market value of the home, they are considered
fully deductible. If the improvement increases the value of your
home, only the amount of the expense that exceeds the increase
in the property value of your home is deductible.
Nursing services. If you are paying out-of-pocket for
a home-based nurse, these expenses may be deductible.
Lead paint removal. Lead paint is dangerous, and the
money needed to remove the paint from a home is deductible.
November 2008 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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