The IRS recently published a series of frequently asked questions (FAQs) to help clarify which nutrition, wellness, and general health expenses may be considered medical expenses.
In this article, we’ll explore these FAQs and offer guidance on when and how certain expenses may be eligible for deductions.
What Counts as a Medical Expense?
Typically, deductions can be claimed for medical expenses incurred during the tax year, provided that certain requirements are met. Medical expenses may also be paid or reimbursed under a health savings account (HSA).
The recently published FAQs address the costs of nutritional counseling, weight-loss programs, gym memberships, and treatment for substance use disorders, among other things. The IRS provides short explanations to help taxpayers determine if an expense is eligible for payment. For instance, an expense may be eligible if it:
Provides a diagnosis of whether a disease or illness is present (like dental, eye, and physical exams), or
Treats a diagnosed disease or illness (like programs for substance abuse or alcohol use disorders or smoking cessation programs).
Claiming medical expenses on your tax return
To claim medical expenses on your tax return, you must itemize deductions on Schedule A (Form 1040). You cannot claim medical expenses if you take the standard deduction. If you decide to claim medical expenses, it’s essential to keep records and receipts of your expenses throughout the year to substantiate your claims.
The threshold for claiming medical expenses
For the tax year, you can only deduct the amount of your total medical expenses that exceed 7.5% of your adjusted gross income (AGI). For example, if your AGI is $50,000, you can claim deductions for medical expenses that exceed $3,750 (7.5% of $50,000). Any expenses below this threshold are not deductible.
Medical expenses for dependents
You may also be able to claim medical expenses paid for your dependents like your spouse or children. Expenses for a dependent’s medical care should be included with your own medical expenses when calculating your total deductions.
What are some examples of deductible medical expenses?
Understanding which medical expenses are deductible can help you save on your taxes and make informed decisions about your healthcare spending. Here are some common medical expenses that may be deductible under certain circumstances:
Therapy: the cost of therapy can be considered a medical expense if it’s for treating a disease. For instance, therapy for a diagnosed mental illness qualifies as a medical expense, whereas marital counseling does not.
Nutritional counseling and weight-loss programs are only considered medical expenses if they treat a specific disease diagnosed by a physician, such as diabetes.
Food and beverages for weight loss or health reasons: these can be considered medical expenses if (1) the food or beverage doesn’t satisfy normal nutritional needs, (2) it alleviates or treats an illness, and (3) the need for the food or beverage is substantiated by a physician. The medical expense is limited to the amount by which the cost of the food or beverage exceeds the cost of a product that satisfies normal nutritional needs.
Over-the-counter drugs and medicines: the cost of OTC drugs, except for insulin, is not deductible unless it’s prescribed by a physician. However, OTC drugs and menstrual care products may be paid or reimbursed by an HSA.
Nutritional supplements: are only considered a medical expense if the supplements are recommended by a medical practitioner as treatment for a specific medical condition.
Cosmetic procedures: Cosmetic procedures are generally not considered deductible medical expenses. However, if a cosmetic procedure is necessary to improve a deformity arising from a congenital abnormality, personal injury resulting from an accident or trauma, or disfiguring disease, it may be considered a deductible medical expense.
Prescription-Based Deductions
It’s important to note that some expenses may only be deductible if a doctor prescribes them to treat a specific disease. For example, a gym membership purchased due to a diagnosis of obesity or high blood pressure would be deductible. However, a membership bought for the individual’s general health would not be eligible for deductions.
Understanding what counts as a medical expense and which expenses are deductible can help you save money on your taxes while making informed decisions about your healthcare spending. The recently published FAQs by the IRS provide helpful guidance, but it's always best to speak with one of our expert advisors to ensure you're maximizing your deductions and staying compliant with tax laws. Please contact our office if you have any questions or would like to discuss deductible medical expenses further.