Introduction to deducting medical expenses
sponsored by the
Stepnowski Law Offices
Throughout the year, and before April 15
you should keep track of your medical and
expenses as you go along . While this
page is geared to those
with children with neurological impairments,
it does provide an overall
description of the general tax treatment. Did
you know that
of neurological impairments (that your health
insurer did not pay
they were "educational") can be tax-deductible
Your situation may differ, and if you have
a tax professional with print-outs of
the links below since he or
may not be familiar with everything a family
with large medical needs
has to go
Meeting the threshold and how it affects tax
the Federal government severely restricts the
medical deduction to the
amount exceeding 7.5%
your income. Thus, deducting works only
for those who itemize
(Most people with a mortgage should itemize
since the interest, real
tax and state income tax deductions carry you
above the "Standard
threshold.) The key here is meeting both
expenses exceed 7.5% of your adjusted gross
income, you cannot include
any medical expenses in your deductions.
- Example 1: a family with an income of
(plus the rest of the family's
medical, conference, orthodonia,
and other expenses of $2,000) for a total
medical expense of
Since 7.5% of $50,000 is $3,750, the
family can include $11,250
deductions. At a tax rate of 15%, the
tax savings are $1,687.50.
- Example 2: same family with $100,000
$7,500. The family can include $6,500
more deductions. At a tax
of 28%, the tax savings are $1,820.
|@ 7.5 %, threshold
|Total Medical Expenses
|increased amount to
|your tax savings
Note for 2013: the Obama tax law
increased taxes on families with members with
medical needs. (You read that
correctly.) For expenses incurred after
January 1, 2013, families will not be able to
deduct as much on their taxes. The new
columns on the right (2013) show that the
amount of tax savings will be reduced compared
to the the columns on the left (2012), by
several hundred dollars.
Because the Internal Revenue Code
severely limits the deductions of
medical bills, especially in 2013, you may
want to pay these
expenses through a Health Savings Account
(HSA). This type of
plan may be offered by your employer when
paired with a high deductible
policy. The advantage is that the
expenses are paid at
pretax income. The details
are in IRS publication
969, but contact your employer's human
resource department to see if
this plan is offered.
Do not rely on this article as advice.
apply, such as Alternate Minimum Tax and
upper income restrictions.
What can be deducted
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.
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.
The details are discussed in the next pages.
issues guidance on deducting personal care
items as medical expenses
The IRS deems "medical care" expenses as the
amounts paid for the diagnosis,
mitigation, treatment, or prevention of
disease, or for the purpose of
affecting a structure or function of the body.
Medical care expenses are
to expenses paid primarily for the prevention
or alleviation of a
physical or mental defect or illness.
expense which is merely beneficial to general
health is a personal
expense and not deductible. A question
often arises when an item
can be both. The IRS will look to
these factors to determine whether a
dual-purpose item (i.e., one that
could be used for personal as well as medical
reasons) is primarily for
medical care, including:
- the motivation or purpose for making the
- whether a physician has recommended the
item to treat
or mitigate a diagnosed medical condition,
- linkage between the treatment and the
- proximity in time to the condition’s onset
- and most importantly, the expense would
been paid "but for" the disease or illness.
See the OTC letter.
may also be
deducted if they qualify.
Dietary items and other
Other Tax Credits are available
Because of your child's disability, you may
other credits, including
- Illinois education credits
- Dependent Care Credits
- Earned Income Credits
For more information about tax credits, see
page by click ing link below.
To see the detail of the laws and
IRS Revenue Rulings and publications.
- "Medical expenses;
fees. If recommended
by the doctor, amounts paid for the
child's tutoring by a teacher
trained and qualified to deal with
severe learning disabilities may
be deducted. "
- Therapy and
- Legal fees.
we discuss tax credits.
Circular 230 Disclosure:
United States Treasury Regulations provide
that a taxpayer may rely
only on formal written advice meeting
requirements to avoid federal tax
penalties. Any tax advice in the text
of this page,
does not meet those requirements and,
accordingly, is not intended or
written to be used, and cannot be used, by
any recipient to avoid any
penalties that may be imposed upon such
recipient by the Internal
Back to the
1515 N. Harlem
Oak Park, Illinois 60302
telephone: (708) 848-3663, 848-3662
fax: (708) 848-0219
creates an attorney-client relationship.