Medical Expenses
Health Insurance Premiums * Long Term Care Insurance Premiums: * Transportation * Therapist, Nurses, etc. * Eyeglasses, hearing aids, dental work, psychotherapy, and prescription drugs * Dependents and Others * Employer provided medical reimbursement plans * Smoking-Cessation Programs * Sec 105 Medical Reimbursement Plans * Back to General Tips on Itemized Deductions * Back to Itemized Deductions Topics * Back to Fall Tax Planning Guide Index
- Health Insurance Premiums. The cost of health insurance is a medical expense. This item can total thousands of dollars each year. Even if you are receiving coverage by your employer, you may be contributing a portion of the premium as a payroll deduction. If the premium is done through a cafeteria plan with pretax dollars, then the payments do not qualify as a deductible medical expense.
- Long Term Care Insurance Premiums:Medical expenses also include premiums paid on long term care insurance, subject to specific limitations depending on age. "Qualified long term care insurance" is insurance that provides coverage only for qualified long term care services, does not pay costs that are covered by Medicare, is guaranteed renewable, and does not provide for cash surrender value. "Qualified long term care" services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance or personal services required by a chronically ill individual under a plan of care presented by a licensed health care practitioner. An individual must be certified as chronically ill by a certified physician or other licensed health care practitioner.
The 1999 deductible limits per individual are as follows:
| 40 years old or younger |
$ 210 per year |
| 40 to 50 years |
$ 380 per year |
| 50 to 60 years |
$ 770 per year |
| 60 to 70 years |
$ 2,050 per year |
| over 70 years of age |
$ 2,570 per year |
- Also see the discussion of long-term care in the Estate Planning section of this manual for perspective.
- Transportation. The cost of getting to and from medical treatment is a medical expense. This includes taxi fares, public transportation, or the cost of using your own car. Car costs can be calculated at 10 cents per mile plus tolls and parking. Cost of lodging not provided by a hospital or similar institution is deductible up to $50 per night per person. Meals are not deductible.
- Therapist, Nurses, etc. The services of individuals other than doctors can qualify as long as they relate to a medical condition and are not for general health reasons. For example: cost of the services of a physical therapist for several months after knee surgery would qualify. On the other hand, a general physical fitness counselor to tone you up would not qualify.
- Eyeglasses, hearing aids, dental work, psychotherapy, and prescription drugs are deductible expenses if they are required for medical reasons such as improving eye sight. However, expenses for purely cosmetic reasons such as a face lift do not qualify. Only prescription drugs or over the counter drugs prescribed by a doctor (such as insulin) are deductible. No amounts paid for operations or treatments that are illegal under federal law are deductible.
- Dependents and Others. If you cover the medical costs of dependents, these costs can also be included. Additionally, if you are covering the costs of an individual who would qualify as your dependent except that he or she has too much gross income to be claimed as a dependent. For example: medical expenses paid for your elderly parents or grandparents. In most cases, the medical costs of a child of divorced parents can be claimed by the parent who pays the actual expense regardless of who gets the dependency exemption.
- Employer provided medical reimbursement plans. All medical expenses including insurance premiums previously discussed that are covered under an employer pretax cafeteria plan are not deductible. The amounts paid through this plan (deferred compensation) are not included as taxable compensation on your W2.
- Tip: Paying medical expenses through an employer medical reimbursement plan is a bigger tax savings than itemized deductions.
- Smoking-Cessation Programs (new for 1999). In 1999 the IRS revoked a 1979 ruling and said that taxpayers may count the unreimbursed costs of smoking-cessation programs as deductible medical expenses, even though they have no specific aliment or disease. The law includes prescription drugs designed to alleviate nicotine withdrawal. However, the tax law does not allow a deduction for over-the-counter medications such as nicotine patches and gum. The deduction was made
retroactive for prior tax years. Therefore, the taxpayers that paid for smoking-cessation programs in recent years might get a refund by filing an amended tax return. Those who already had enough medical expenses to deduct them on the original return would benefit by
amending their returns to include the smoking program costs. (Rev Rul 99-28)
- It is still better to deduct Medical Insurance Premiums and Medical Expenses as part of a Qualified Sec 105 Medical Reimbursement Plan, such as AgriPlan/BizPlan discussed elsewhere in this manual.
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