Tax Question | Autism PDD

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Cyndie wrote "add up your total on doctors appt. your ded. you paid or co pays. prescriptions that you paid, therapy, eye glasses/contacts/ appointments. anything like that. as long as you have a receipt.

Cyndie, Does this mean you can count the total doctor bills toward the 7% - even the portion insurance paid?  I don't do our taxes, so please excuse me for being clueless!

Also, we did the medical flex savings thing last year just to try it out and will probably do more this year. We put in 00 b/c I had braces for 8 months starting in January (at the time I didn't realize we'd be going through all this w/ Ansley, but at least I have straight, white teeth now!

BTW - Kellie, that's an awesome new pic!  Is it you and Luke?

Kellie, most Drs offices and pharmacys can very easily print you out a list of every visit and every copay, dates included. I got one from the pharmacy, it listed every date, what was bought, was it a refill, our portion and the HMO portion etc.....We get our HMO payments deducted BEFOR taxes and if you do that you can not ALSO take a medical deduction, so you need to (for next year), do the math and see which best suits you (if you have the option of paying pretax). Our CPA tol dme that if our expenses were going to be aprox 4 thousand dollars over and above the amount required to start the deduction(I think). So last year we were going to stop the before tax payment, but we decided to go ahead and apply for DS a medicaid card. It is his secondary payor, first our HMO then MC...but, it certainly is very limited in the services it does cover, Our state does not recognise ABA, they (from what I understand) stopped approving for and covering this therapy about 2 years ago. I know that is more than you asked...LOL! sorry I got long winded

Kellie,

You can only claim that on your tax return if your medical expenses is at least 7% or more of your adjusted gross income. We have been claiming all our medical stuff on our tax return. Our tax guy said our canceled checks will suffice as documentation.

Sond

 

thats right 7%, add up your total on doctors appt. your ded. you paid or co pays. prescriptions that you paid, therapy, eye glasses/contacts/ appointments. anything like that. as long as you have a receipt. when you file you must file itemized filing.

Here's a link to publication 502 that should help.

http://www.bankrate.com/brm/frames/hyperlink.asp?link_addr ess=http://www.irs.gov/pub/irs-pdf/p502.pdf

I think this year we will just be at teh 7.5% mark so we won't file...but next year will be a different story.

Also does your husband's employer offer a flex health care spending account. That's something else to look into.
Thanks guys ... will have to look thru our canceled checks. Of course, silly me paid cash for almost all our copays.   (- a pop!)  I *had* receipts for those, but God knows what I did with them all.  What a hassle.  We easily have met 7% this year, with Luke and the new baby and all. Binders!  What a great idea.  Will be doing that!!  Much easier to keep things organized throughout the year than to try to do it at the end.  We have files for all house expenses, etc., and just kind of threw all the medical expenses in a file -- but they're pretty disorganized. I found something I have never heard of (among many, many , many other things I have never heard of)



     
             
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Year 2004 Tax Benefits for Parents of Children with Learning Disabilities   
   
     
                
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If you have a child with a severe learning disability, you may qualify for valuable tax benefits. If your child has AD/HD, or other physical, mental or emotional impairment, you may also qualify for tax benefits. Because tax laws are complex, and many tax preparers often do not have occasion to use these unique tax benefits, families are at risk of losing refunds worth many thousands of dollars. It’s likely that 15-30 percent of families with a disabled child have one or more unclaimed tax benefits.

This guide provides a brief summary of the most significant tax benefits and should not be considered legal advice. Tax decisions should not be made simply on the basis of the information provided here. You are advised to print out this guide and give a copy to your tax advisor.

Internal Revenue Service (IRS) “Publications” represent the most accessible form of guidance to the tax rules for the general public, and relevant IRS publications are cited for each of the tax benefits listed below. The IRS also issues interpretations of the code and regulations called “Revenue Rulings.” These interpretations are formal, binding policy statements. Tax professionals rely on revenue rulings in advising clients about tax liabilities and tax benefits. For example, Revenue Ruling 78-340, discussed later, authorizes a medical expense deduction for tuition or tutoring fees paid for a child with a severe learning disability who is attending a special school at the recommendation of the child’s doctor.



Tip: Relative caretakers, such as grandparents or aunts, and non-relative caretakers, such as foster parents, also may qualify for tax benefits. See a related tax guide of the Casey National Center for Resource Family Support.




Tax Benefits: Deductions vs. Credits

It’s important to distinguish between two different categories of tax benefits. One category is a “deduction from taxable income” or simply “a deduction.” The value of a deduction is based on the marginal tax rate of the taxpayer. If a person has a tax deduction “worth ,000,” the actual value of the deduction will be determined by the taxpayer’s tax rate. So a taxpayer in the lowest tax rate bracket, 10 percent, will have taxable income reduced by ,000, and save 0 (10 percent of ,000). However, a taxpayer in a higher bracket, say the 28 percent, will have taxable income reduced by ,000, and save 0 (28 percent of 1,000).

The second tax benefit is a tax credit, which is a dollar for dollar reduction in tax liability. An individual with a tax credit worth ,000 will have his tax bill reduced by ,000. This means that the actual amount of taxes is reduced by the amount of the tax credit. However, because tax laws and procedures are very complicated, other factors can influence the ultimate value to the taxpayer.

The following summarizes the principal tax benefits that may be available to families caring for children with severe learning disabilities.

Retroactive Claims for Refunds

The IRS allows taxpayers to file amended returns, and collect refunds for unclaimed tax benefits, retroactively up to three years. This means a taxpayer can file an amended return for the 2001 tax year and claim a refund if the return is filed not later than April 15, 2005. (See IRS Publication 17, Tax Guide 2004, at pp. 20-21.)

Medical Expense Deductions

The IRS has ruled that tuition costs for a special school that has a program designed to educate children with learning disabilities and amounts paid for a child’s tutoring by a teacher specially trained and qualified to deal with severe learning disabilities may also be deducted. (Revenue Ruling 78-340, 1978-2 C.B. 124.) Special instruction or training or therapy, such as sign language instruction, speech therapy, and remedial reading instruction also would be deductible. Related books and materials can qualify for the medical expense deduction.

Generally, to qualify for the deduction, the child’s doctor must recommend the special school, therapy, or tutoring, and there must be a medical diagnosis of a neurological disorder, such as severe learning disability, made by a medical professional. Transportation expenses to the special school or to the tutor also qualify for a medical expense deduction. If transportation is by car, the allowable expense in 2004 is fourteen cents per mile plus parking and tolls, or the actual cost of operating the vehicle.

Diagnostic evaluations also qualify for a medical expense deduction. This can include testing by a speech-language pathologist, psychologist, neurologist, or other person with professional qualifications.

Note: Expenses claimed as a medical expense deduction and later reimbursed by a school district or insurance company must be reported as taxable income for the year in which the reimbursements are received.
Not everyone who has medical expenses can use them on their tax return. Medical expenses must be claimed on Schedule A, Itemized Deductions, and are subject to certain limitations. First, the family must have itemized deductions that exceed their standard deduction in order to use Schedule A (about 65 percent of taxpayers do not itemize for this reason). Second, medical expenses are allowed as a deduction only to the extent that they exceed 7.5 percent of adjusted gross income, a significant threshold for many families. (See IRS Publication 502, Medical and Dental Expenses.)

Health Saving Accounts & Flexible Savings Arrangements

Alternative approaches to obtaining tax benefits in connection with medical expenses may involve use of a Health Saving Account (HSA) or a Flexible Savings Arrangement (FSA). An HSA allows a worker to use up to ,150 in pretax income for medical expenses. An HSA may only be opened where the employee has a “high deductible” health insurance plan. Amounts placed in an HSA may be carried over to following years if not used.

A Flexible Savings Arrangement (FSA) can be part of a “cafeteria plan” of alternative fringe benefits offered by an employer. An employee can allocate pre-tax income to the account, and then withdraw it during the year to pay for medical expenses. Employers may also make contributions to the FSA, and the maximum amount is set by the terms of the employer plan. Two important conditions are that amount to be placed in the account must be determined by the employee at the beginning of the year, and funds not used by the end of the year are lost. The employer’s human resource office can provide more information. Also, see IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

Deduction for Disability Related Conferences

In May 2000 the IRS issued Revenue Ruling 2000-24, which offers guidance — and good news — for parents of children with disabilities. Parents who attend conferences to obtain medical information concerning treatment for and care of their child may deduct some of the costs of attending a medical conference relating to a dependent’s chronic health condition. The important points to remember are:

Medical expenses are deductible only to the extent that they exceed 7.5 percent of an individual’s adjusted gross income, and that limitation applies to this deduction as well;


Costs for admission and transportation to a medical conference relating to your dependent’s chronic health condition are now deductible, if the costs are primarily for and essential to the care of the dependent.


Costs of meals and lodging related to a conference, however, are not deductible. (Note, however, lodging, up to per night, is deductible if you must travel and stay at a hotel while your dependent is receiving medical treatment from a licensed physician in a hospital or a related or equivalent setting.)


Costs are “primarily for and essential to the care of the dependent” (and therefore deductible) if:


The parent attends the conference upon the recommendation of a medical provider treating the child;


The conference disseminates medical information concerning the child’s condition that may be useful in making decisions about the treatment of or caring for the child;


The primary purpose of the visit is to attend the conference. While at the conference, the parent’s social and recreational activities in the city he or she is visiting are secondary to attendance at the conference;


The conference deals with specific issues related to a medical condition and does not just relate to general health and well-being.
The full text of IRS Revenue Ruling 2000-24 is available at Amicus for Children, Inc.

Child and Dependent Care Credit

The Child and Dependent Care Credit is allowed for work related expenses incurred for dependents of the taxpayer. Generally the dependent must be under the age of 13. However, if the child has a disability and requires supervision, the age limit is waived. For example, a 16-year-old with severe AD/HD and a behavior disorder who cannot be left alone would be a qualifying child for this credit.


Because tax laws are complex, and many tax preparers often do not have occasion to use these unique tax benefits, families are at risk of losing refunds worth many thousands of dollars.   





Expenses up to ,000 per year for one qualifying dependent and up to ,000 for two or more qualifying dependents are allowed. Expenses for regular childcare services, after-school programs, and summer camp qualify although overnight summer camp expenses do not. Payments to a relative to care for a child also qualify, as long as the relative is not a dependent of the taxpayer. The credit is calculated at 20-35 percent of allowable expenses, based on the family’s adjusted gross income. The average credit is about 0 but can be as high as ,100. (See IRS Publication 503, Child and Dependent Care Expenses.)

Exemption for Dependents

A taxpayer is entitled to claim an exemption for each qualified dependent. This may appear relatively straightforward, but caretakers, such as grandparents, aunts, or even foster parents, may overlook exemptions. Also, in some cases a non-custodial parent who provides the majority of support for a child with a severe learning disability, and also pays for medical/educational expenses related to the child’s learning disability, may likewise qualify for both the exemption and medical expense deductions. There is a five-part test, with the most significant test involving support. That is, the taxpayer must be the primary source of support — more than 50 percent — for the person claimed as a dependent. For each dependent, there is an exemption from taxable income, worth ,100 for the 2004 tax year. For a taxpayer with a marginal tax rate of 25 percent, each exemption will reduce the tax liability by 5. Equally important, the dependency status is required for some tax benefits such as the child and dependent care credit listed above. Also dependents under age 17 qualify for the Child Tax Credit, worth up to ,000 per child. (See IRS Publication 501, Exemptions, Standard Deduction and Filing Information , and Instructions to Form 1040.)

Earned Income Tax Credit

Families filing a married joint return with adjusted gross income under ,458 (,000 less for taxpayers filing as single or head of household) may qualify for the Earned Income Tax Credit (EITC) based on the presence of one or two “qualifying children” in the taxpayer’s home. For EITC purposes, a “qualifying child” is a biological child, adopted child, step child, or foster child who resided with the taxpayer for more than six months during the calendar year, and is under age 19 at the end of the year. A “qualifying child” is also a child age 19-23 who is a full-time student for at least one semester. Finally, a severely disabled child is a “qualifying child” without regard to age, even into adulthood, as long as the child continues to live with his parent(s). Note that a “qualifying child” for EITC does not have to meet the requirements for a dependency exemption. EITC benefits are as high as ,300 for families with two or more qualifying children, although the average EITC nationally is about ,800. (See IRS Publication 596 for more information.)

Where to Get More Information

The IRS provides free booklets that cover each of the topics listed above. The titles listed below may be ordered by calling the IRS toll-free number: (800) 829-3676. Generally, taxpayers may order up to three copies of any publication or form. The following booklets may be helpful:

IRS Publication 17: Your Federal Income Tax (a comprehensive 300+ page guide)
IRS Publication 502: Medical and Dental Expenses
IRS Publication 503: Child and Dependent Care Expenses
IRS Publication 501: Exemptions, Standard Deduction and Filing Information
IRS Publication 596: Earned Income Tax Credit
IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans
Extensive information can also be obtained from the IRS. The American Bar Association Section on Taxation contains links to scores of tax related sites.

Tax Counseling and Tax Preparation Assistance

Certified Public Accountants (CPAs) represent one source of tax advisors, although not all CPAs have expertise in this area. Enrolled Agents are individuals licensed by the IRS to represent taxpayers, and this group generally has a high degree of expertise.

Typically, charges for a tax return with multiple deductions and credits will cost 0-300. Several national companies provide tax preparation and tax counseling services. Many operate only during the tax filing season but a small number in larger urban areas are open year round. Fees charged by these companies are slightly lower than the fees typically charged by CPAs and Enrolled Agents.

Some parents may not be able to afford fees charged by professional tax preparers, who generally seek payment in advance. An option for lower income clients is the Volunteer Income Tax Assistance (VITA) program. However, because of broad range in skills and expertise of volunteers, caution is recommended. Some large cities have one or more VITA programs that offer professional level services. A university accounting department or the local legal services program may be able to help you identify a high quality VITA program.

Disputes with the IRS

Disputes with the IRS are relatively rare; less than 1.5 percent of all individual income tax returns are subject to an IRS audit. However, if the IRS questions your return, and you feel an IRS agent is not responding properly, contact the Taxpayer Advocate for assistance toll-free at (877) 777-4778. Low Income Taxpayer Clinics are another source of help. The IRS funds more than 100 such clinics to represent lower income taxpayers in disputes with the IRS or state revenue departments. Clinics assist taxpayers with income under 250 percent of the poverty level — about ,000 for a family of four. Some clinics, especially those attached to law schools, will represent higher income families. Information on the nearest clinic can be obtained from the general IRS toll-free inquiry number at (800) 829-1040. Families above this income level should call their county or state bar association.

Final Thoughts

This guide offers a brief summary of some, but not all, of the potential tax benefits that may be available to you. You should obtain copies of the IRS publications cited above and discuss with your tax advisor whether these benefits apply to you. Again, you should not rely on this guide alone to determine whether you should claim any of the tax benefits reviewed here.

   
   
   
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© 2005 Charles and Helen Schwab Foundation   Created: 01/14/2005
   
   
     
   
About the Contributor(s)   
   

Michael A. O'Connor is an attorney who promotes awareness of tax policies that benefit families. In addition, he represents parents in disputes with local school districts concerning special education services for learning disabled children. He is a Board Member of the Council of Parent Attorneys & Advocates (COPAA). Read more articles by Michael O'Connor.

   
     
   
       

     
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Jean38647.5108101852

Jean, I know that was to Kellie, but you answered a ? for me as well!  My Dh's company takes out our portion of the payment for the HMO before taxes as well, so we wouldn't be able to deduct anyway.  I guess we'll do more w/ the flex spending acct. next year.  The reason we didn't do more this year is we normally don't have that many doc bills and we were worried b/c if you don't use it all, you lose it!   Thanks!

Amy, Yeah that's us, though when I downloaded it, the picture got blurry.  We don't look so blurry in real life.   And I don't usually wear hats!

Jean,
Were you talking about the flex health care account?  (That you can't claim those expenses as well as claim a medical deduction?)  We only put 0 in our flex acct (being optimistic about our lives, last November! ), and I'm sure we still have above the 7% of our AGI in medical bills.

hey guys anything you pay out of pocket you can add up. you can not count what they pay. if you pay part of health ins thru work you can count that. this year alone we will pay almost 9,000 in health ins thru my husband company not including all hte co pays/for doctors etc. i started a 3 ring binder new one each year. and label folders with. dr./pres/ eyes/ and also if you file itimeized you claim your int. on your house/car personal property-if you have any. and house personal property.

 aparently its possible regadless of your financial situation. good luck with the tax situation, i also will try to do the same thing for taxes and hopefully the medicade thing will work out for ds and that will be 1 less insurace issue to worry bout next year since the medicade thing will just be for ds.

     sonia

Not sure where this would fit, so I figure I'll ask this here and let it be moved if necessary.

With all that we've done with Luke, we'll be able to claim our medical expenses on our taxes this year.  We do our taxes ourselves, so we need a little advice on exactly how to claim our medical expenses.  Any tips for how to organize the information?  What does one do when the insurance company starts reimbursing some of the fees?  (We've reached our deductibles in several areas.)  How does one keep track of all this info?  Any tips on how to find out what types of things one can claim?  Also, we now have an ABA-like program up and running.  What sort of things do others do to keep all the expenses documented?  Lastly, will we be automatically suspect by the IRS for suddenly claiming medical expenses?

Thanks!  (My dh asked me to write this here tonight saying, "Since you love your friends online so much, maybe you could ask them this." LOL)
kaviar38646.8481712963

                                               hi kellie,

my ds preschool said there is a way to file for medicade to cover all expences for ds meds even if u are not eligilabe and have private insurane we have an apt. with this person in schol, so i dont have anymore info but u can ask around and i will certainly let u know when i get more info.

 

    sonia

Kellie, We're kind of in the same boat as you this year since Ansley was dx'd in March.  I'm looking forward to reading the replies!Thanks, Sonia ... though we're not looking for Medicaid at this time.  Just looking to see how we can claim the monies we paid out for our (well, mostly Luke's) medical bills this year.  But thank you for the head's up on the Medicaid issue.  I've heard of that, too, but haven't been able to find out how to obtain that without meeting a certain financial elligibility.  Looking forward to hearing how it's possible!

Kellie The state of Ohio has Medicaid waivers for the disabled here is a link that hopefully will be helpful for you. http://olrs.ohio.gov/ASP/olrs_WaiversTables.asp

I may be wrong but I think BCMH (Bureau of Children with Medical Handicaps) does NOT go on income.. http://www2.odh.ohio.gov/odhprograms/cmh/cmh1.htm or  http://ecedi.ohio.gov/bcmh/index.htm I have no personal knowledge of it but have heard just a little from a person or 2 about it in the past  (also see http://64.233.187.104/search?q=cache:ynN6VhKdRLQJ:cshcnleade rs.ichp.edu/TitleVDirectory/PDF-Files-2002/Ohio_2002.pdf+BCM H&hl=en )

Here is another link that may or may not be helpful for you,.....
http://pascenter.org/state_based_stats/medicaid_waivers_info .php?title=Contact%20Info%20and%20Descriptions&state=ohi o

A link for all area about waivers (etc)
http://www.geocities.com/HotSprings/Villa/1029/medicaid.html

Here are Ohio's .......

First come, first served. State regulations include cost as a component of eligibility.

Ohio Medicaid:

http://www.state.oh.us/odjfs/ohp

Ohio Home Care Program:

http://www.state.oh.us/odjfs/ohp/bcltcs/ohiocare.stm

Ohio Waivers:

http://198.30.214.7/employment/waiver/default.htm
http://odmrdd.state.oh.us/Includes/Waivers/Waivers_Forms.htm
http://www.state.oh.us/olrs/fsc/asp/WaiverServicesTopicTXT.a sp
 
 
Sorry I can't be more specific and helpful



http://www.irs.gov/publications/p502/


Publication 502 - Main Contents

------------------------------------------------------------ --------------------

Table of Contents

What Are Medical Expenses?
What Expenses Can You Include This Year?
Community property states.
How Much of the Expenses Can You Deduct?
Whose Medical Expenses Can You Include?
What if the decedent's return had been filed and the medical expenses were not included?
What if you pay medical expenses of a deceased spouse or dependent?
What Medical Expenses Are Includible?
Abortion
Acupuncture
Alcoholism
Ambulance
Artificial Limb
Artificial Teeth
Autoette
Bandages
Breast Reconstruction Surgery
Birth Control Pills
Braille Books and Magazines
Capital Expenses
Car
Chiropractor
Christian Science Practitioner
Contact Lenses
Crutches
Dental Treatment
Diagnostic Devices
Disabled Dependent Care Expenses
Drug Addiction
Drugs
Eyeglasses
Eye Surgery
Fertility Enhancement
Founder's Fee
Guide Dog or Other Animal
Health Institute
Health Maintenance Organization (HMO)
Hearing Aids
Home Care
Home Improvements
Hospital Services
Insurance Premiums
Laboratory Fees
Lead-Based Paint Removal
Learning Disability
Legal Fees
Lifetime Care—Advance Payments
Lodging
Long-Term Care
Meals
Medical Conferences
Medical Information Plan
Medical Services
Medicines
Mentally Retarded, Special Home for
Nursing Home
Nursing Services
Operations
Optometrist
Organ Donors
Osteopath
Oxygen
Prosthesis
Psychiatric Care
Psychoanalysis
Psychologist
Special Education
Sterilization
Stop-Smoking Programs
Surgery
Telephone
Television
Therapy
Transplants
Transportation
Trips
Tuition
Vasectomy
Vision Correction Surgery
Weight-Loss Program
Wheelchair
Wig
X-ray
What Expenses Are Not Includible?
Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby
Controlled Substances
Cosmetic Surgery
Dancing Lessons
Diaper Service
Electrolysis or Hair Removal
Flexible Spending Account
Funeral Expenses
Future Medical Care
Hair Transplant
Health Club Dues
Health Coverage Tax Credit
Health Savings Accounts
Household Help
Illegal Operations and Treatments
Insurance Premiums
Maternity Clothes
Medical Savings Account (MSA)
Medicines and Drugs From Other Countries
Nonprescription Drugs and Medicines
Nutritional Supplements
Personal Use Items
Swimming Lessons
Teeth Whitening
Veterinary Fees
Weight-Loss Program
How Do You Treat Reimbursements?
Insurance Reimbursement
How Do You Figure and Report the Deduction on Your Tax Return?
What Tax Form Do You Use?
How Do You Figure Your Deduction?
Sale of Medical Equipment or Property
Determining gain.
Damages For Personal Injuries
Impairment-Related Work Expenses
Health Insurance Costs for Self-Employed Persons
Health Coverage Tax Credit
Eligible Individual
Qualifying Family Member
Qualified Health Insurance
Nonqualified Health Insurance
Eligible Coverage Month
How To Report
Refundable and Advanceable
How To Get Tax Help
What Are Medical Expenses?
Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include dental expenses.

Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.

Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract.

What Expenses Can You Include This Year?
You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. (But see Decedent under Whose Medical Expenses Can You Include, later, for an exception.) If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged.

If you did not claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040X, Amended U.S. Individual Income Tax Return, for the year in which you overlooked the expense. Do not claim the expense on this year's return. Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later.

You cannot include medical expenses that were paid by an insurance company or other sources. This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services.

Separate returns.   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise.

Community property states.   If you and your spouse live in a community property state and file separate returns, any medical expenses paid out of community funds are divided equally. Each of you should include half the expenses. If medical expenses are paid out of the separate funds of one spouse, only the spouse who paid the medical expenses can include them. If you live in a community property state, are married, and file a separate return, see Publication 555, Community Property.

How Much of the Expenses Can You Deduct?
You can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income (Form 1040, line 37).

In this publication, the term “7.5% limit” is used to refer to 7.5% of your adjusted gross income. The phrase “subject to the 7.5% limit” is also used. This phrase means that you must subtract 7.5% (.075) of your adjusted gross income from your medical expenses to figure your medical expense deduction.

Example.

Your adjusted gross income is ,000, 7.5% of which is ,000. You paid medical expenses of ,500. You cannot deduct any of your medical expenses because they are not more than 7.5% of your adjusted gross income.

Whose Medical Expenses Can You Include?
You can generally include medical expenses you pay for yourself as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. There are different rules for decedents and for individuals who are the subject of multiple support agreements.

Spouse.   You can include medical expenses you paid for your spouse. To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses.

Example 1.

Mary received medical treatment before she married Bill. Bill paid for the treatment after they married. Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns.

If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Mary would include the amounts she paid during the year in her separate return. If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction.

Example 2.

This year, John paid medical expenses for his wife Louise, who died last year. John married Belle this year and they file a joint return. Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical deduction for this year.

Dependent.   You can include medical expenses you paid for your dependent. For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. A person generally qualifies as your dependent for purposes of the medical expense deduction if all three of the following requirements are met.
That person lived with you for the entire year as a member of your household or is:

Your child, grandchild, great grandchild, etc. (a legally adopted child is considered your child).

Your stepchild.

Your brother, sister, half brother, half sister, stepbrother, or stepsister.

Your parent, grandparent, or other direct ancestor, but not foster parent.

Your stepfather or stepmother.

A brother or sister of your father or mother.

A son or daughter of your brother or sister.

Your father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law.

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 your tax year began.

You provided over half of that person's total support for the calendar year.


You can include the medical expenses of any person who is your dependent even if you cannot claim an exemption for him or her on your return.

Example.

In 2003, your son was your dependent. In 2004, he no longer qualified as your dependent. However, you paid 0 in 2004 for medical services provided to your son in 2003, when he was your dependent. You can include the 0 in your medical expenses for 2004. You cannot include this amount in your 2003 medical expenses.

Adopted child.   You can include medical expenses that you paid for a child before adoption, if the child qualified as your dependent when the medical services were provided or when the expenses were paid.

If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child.

But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses.

   

You may be able to take a credit or exclusion for other expenses related to adoption. See Publication 968, Tax Benefits for Adoption , for more information.

Child of divorced or separated parents.   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if:
The child is in the custody of one or both parents for more than half the year,

The child receives over half of his or her support during the year from his or her parents, and

The child's parents:

Are divorced or legally separated under a decree of divorce or separate maintenance,

Are separated under a written separation agreement, or

Live apart at all times during the last 6 months of the year.

This does not apply if the child's exemption is being claimed under a multiple support agreement.

Support claimed under a multiple support agreement.   If you are considered to have provided more than half of a person's support under a multiple support agreement, you can include medical expenses you pay for that person, even if you cannot claim an exemption for that person. A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half.

For rules regarding what expenses you can include this year, see What Expenses Can You Include This Year, earlier.

Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. However, you can include the entire unreimbursed amount you paid for medical expenses.

Example.

You and your three brothers each provide one-fourth of your mother's total support. Under a multiple support agreement, you treat your mother as your dependent. You paid all of her medical expenses. Your brothers repaid you for three-fourths of these expenses. In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Your brothers cannot include any part of the expenses. However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the amount you paid for her medical expenses in your medical expenses.

Decedent.    Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. This includes expenses for the decedent's spouse and dependents as well as for the decedent.

The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. The expenses must be paid within the one-year period beginning with the day after the date of death. If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return.

   

Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA or health savings account.

What if the decedent's return had been filed and the medical expenses were not included?   Form 1040X can be filed for the year or years the expenses are treated as paid, unless the period for filing an amended return for that year has passed. Generally, an amended return must be filed within 3 years of the date the original return was filed, or within 2 years from the time the tax was paid, whichever date is later.

Example.

John properly filed his 2003 income tax return. He died in 2004 with unpaid medical expenses of ,500 from 2003 and ,800 in 2004. His survivor or personal representative can file an amended return for 2003 claiming a deduction based on the ,500 medical expenses. The ,800 of medical expenses from 2004 can be included on the decedent's final return for 2004.

What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses.

What Medical Expenses Are Includible?
Following is a list of items that you can include in figuring your medical expense deduction. The items are listed in alphabetical order.

Abortion
You can include in medical expenses the amount you pay for a legal abortion.

Acupuncture
You can include in medical expenses the amount you pay for acupuncture.

Alcoholism
You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for alcohol addiction. This includes meals and lodging provided by the center during treatment.

You can also include in medical expenses amounts you pay for transportation to and from meetings of an Alcoholics Anonymous Club in your community if the attendance is pursuant to medical advice that membership in the Alcoholics Anonymous Club is necessary for the treatment of a disease involving the excessive use of alcoholic liquors.

Ambulance
You can include in medical expenses amounts you pay for ambulance service.

Artificial Limb
You can include in medical expenses the amount you pay for an artificial limb.

Artificial Teeth
You can include in medical expenses the amount you pay for artificial teeth.

Autoette
See Wheelchair, later.

Bandages
You can include in medical expenses the cost of medical supplies such as bandages used to cover torn skin.

Breast Reconstruction Surgery
You can include in medical expenses the amounts you pay for breast reconstruction surgery following a mastectomy for cancer.

Birth Control Pills
You can include in medical expenses the amount you pay for birth control pills prescribed by a doctor.

Braille Books and Magazines
You can include in medical expenses the part of the cost of Braille books and magazines for use by a visually impaired person that is more than the cost of regular printed editions.

Capital Expenses
You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. The cost of the improvement is reduced by the increase in the value of your property. The difference is a medical expense. If the value of your property is not increased by the improvement, the entire cost is included as a medical expense.

Certain improvements made to accommodate a home to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. These improvements include, but are not limited to, the following items.

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.


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.

Capital expense worksheet.   Use Worksheet A to figure the amount of your capital expense to include in your medical expenses.

Worksheet A. Capital Expense Worksheet

Instructions: Use this worksheet to figure the amount, if any, of your medical expenses due to a home improvement.
1. Enter the amount you paid for the home improvement 1.    
2. Enter the value of your home immediately after the improvement 2.       
3. Enter the value of your home immediately before the improvement 3.       
4. Subtract line 3 from line 2. This is the increase in the value of your home due to the improvement. 4.    
• If line 4 is more than or equal to line 1, you have no medical expenses due to the home improvement; stop here.      
• If line 4 is less than line 1, go to line 5.      
5. Subtract line 4 from line 1. These are your medical expenses due to the home improvement 5.    

Example.

You have a heart ailment. On your doctor's advice, you install an elevator in your home so that you will not have to climb stairs. The elevator costs ,000. An appraisal shows that the elevator increases the value of your home by ,400. You figure your medical expense as shown in the filled-in example of Worksheet A.

Worksheet A. Capital Expense Worksheet—Illustrated

Instructions: Use this worksheet to figure the amount, if any, of your medical expenses due to a home improvement.
1. Enter the amount you paid for the home improvement 1. 8,000
2. Enter the value of your home immediately after the improvement 2. 124,400      
3. Enter the value of your home immediately before the improvement 3. 120,000      
4. Subtract line 3 from line 2. This is the increase in the value of your home due to the improvement. 4. 4,400
• If line 4 is more than or equal to line 1, you have no medical expenses due to the home improvement; stop here.      
• If line 4 is less than line 1, go to line 5.      
5. Subtract line 4 from line 1. These are your medical expenses due to the home improvement 5. 3,600

Operation and upkeep.   Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense.

Example.

If, in the previous example, the elevator increased the value of your home by ,000, you would have no medical expense for the cost of the elevator. However, the cost of electricity to operate the elevator and any costs to maintain it are medical expenses as long as the medical reason for the elevator exists.

Improvements to property rented by a person with a disability.   Amounts paid to buy and install special plumbing fixtures for a person with a disability, mainly for medical reasons, in a rented house are medical expenses.

Example.

John has arthritis and a heart condition. He cannot climb stairs or get into a bathtub. On his doctor's advice, he installs a bathroom with a shower stall on the first floor of his two-story rented house. The landlord did not pay any of the cost of buying and installing the special plumbing and did not lower the rent. John can include in medical expenses the entire amount he paid.

Car
You can include in medical expenses the cost of special hand controls and other special equipment installed in a car for the use of a person with a disability.

Special design.   You can include in medical expenses the difference between the cost of a regular car and a car specially designed to hold a wheelchair.

Cost of operation.   You cannot deduct the cost of operating a specially equipped car, except as discussed under Transportation, later.

Chiropractor
You can include in medical expenses fees you pay to a chiropractor for medical care.

Christian Science Practitioner
You can include in medical expenses fees you pay to Christian Science practitioners for medical care.

Contact Lenses
You can include in medical expenses amounts you pay for contact lenses needed for medical reasons. You can also include the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner. See Eyeglasses and Eye Surgery, later.

Crutches
You can include in medical expenses the amount you pay to buy or rent crutches.

Dental Treatment
You can include in medical expenses the amounts you pay for dental treatment. This includes fees paid to dentists for X-rays, fillings, braces, extractions, dentures, etc. But see Teeth Whitening under What Expenses Are Not Includible, later.

Diagnostic Devices
You can include in medical expenses the cost of devices used in diagnosing and treating illness and disease.

Example.

You have diabetes and use a blood sugar test kit to monitor your blood sugar level. You can include the cost of the blood sugar test kit in your medical expenses.

Disabled Dependent Care Expenses
Some disabled dependent care expenses may qualify as either:

Medical expenses, or

Work-related expenses for purposes of taking a credit for dependent care.

You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction.

Drug Addiction
You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for drug addiction. This includes meals and lodging at the center during treatment.

Drugs
See Medicines, later.

Eyeglasses
You can include in medical expenses amounts you pay for eyeglasses and contact lenses needed for medical reasons. You can also include fees paid for eye examinations.

Eye Surgery
You can include in medical expenses the amount you pay for eye surgery to treat defective vision, such as laser eye surgery or radial keratotomy.

Fertility Enhancement
You can include in medical expenses the cost of the following procedures to overcome an inability to have children.

Procedures such as in vitro fertilization (including temporary storage of eggs or sperm).

Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.


Founder's Fee
See Lifetime Care—Advance Payments, later.

Guide Dog or Other Animal
You can include in medical expenses the cost of a guide dog or other animal to be used by a visually impaired or hearing-impaired person. You can also include the cost of a dog or other animal trained to assist persons with other physical disabilities. Amounts you pay for the care of these specially trained animals are also medical expenses.

Health Institute
You can include in medical expenses fees you pay for treatment at a health institute only if the treatment is prescribed by a physician and the physician issues a statement that the treatment is necessary to alleviate a physical or mental defect or illness of the individual receiving the treatment.

Health Maintenance Organization (HMO)
You can include in medical expenses amounts you pay to entitle you, or your spouse or a dependent to receive medical care from a health maintenance organization. These amounts are treated as medical insurance premiums. See Insurance Premiums, later.

Hearing Aids
You can include in medical expenses the cost of a hearing aid and the batteries you buy to operate it.

Home Care
See Nursing Services, later.

Home Improvements
See Capital Expenses, earlier.

Hospital Services
You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. This includes amounts paid for meals and lodging. Also see Lodging, later.

Insurance Premiums
You can include in medical expenses insurance premiums you pay for policies that cover medical care. Policies can provide payment for:

Hospitalization, surgical fees, X-rays, etc.,

Prescription drugs,

Replacement of lost or damaged contact lenses,

Membership in an association that gives cooperative or so-called “free-choice” medical service, or group hospitalization and clinical care, or

Qualified long-term care insurance contracts (subject to additional limitations). See Qualified Long-Term Care Insurance Contracts under Long-Term Care, later.


If you have a policy that provides more than one kind of payment, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement.

Note.
When figuring the amount of insurance premiums you can deduct on Schedule A, do not include any health coverage tax credit advance payments shown on Form 1099-H, box 1. Also, if you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, line 4 (reduced by any advance payments shown on line 6 of that form), from the total insurance premiums you paid.

Employer-Sponsored Health Insurance Plan
Do not include in your medical and dental expenses on Schedule A (Form 1040) any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, box 1. Also, do not include on Schedule A (Form 1040) any other medical and dental expenses paid by the plan unless the amount paid is included on your Form W-2, box 1.

Example.

You are a federal employee participating in the Federal Employee Health Benefits (FEHB) program. Your share of the FEHB premium is paid with pre-tax dollars. Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money.

Long-term care services.   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. This amount will be reported as wages on your Form W-2, box 1.

Health reimbursement arrangement (HRA).   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. This is because an HRA is funded solely by the employer.

Medicare A
If you are covered under social security (or if you are a government employee who