Medical Deduction Income Restrictions

Taxpayers can only deduct medical expenses if they itemize their deductions. Beginning in 2013, medical expenses are only deductible if they exceed 10% (was 7.5% in prior years) of a taxpayer's income (AGI), and then only the amount that exceeds that income limit is actually deductible. For seniors (age 65 or older and their spouses) the limitation remains at 7.5% through 2016. The table below reflects the AGI limitation for various years:

2012 & Before 2013 - 2016
After '16
Individuals under the age of 65
7.5%
10%
10%
Individuals (and their spouses) age 65 before close of year
7.5%
7.5%
10%
Alterative Minimum Tax Threshold
10%
10%
10%

Senior Planning Strategy – Pay Discretionary Medical Expenses Before 2017 Taxpayers age 65 before the close of the year and their spouses with potential discretionary medical expenses, such as orthodontist or dental work, vision care, etc., should consider having work done and paid for before 2017. But note that the costs of surgery purely for cosmetic reasons aren't qualified medical expenses.

Once a taxpayer's expenses exceed the income limits, every additional dollar spent on medical for the year becomes deductible. Therefore, once the minimum is met, it is important to utilize every legal expense. In addition, if you only marginally qualify for medical each year, it may be appropriate, when possible, to “bunch” medical deductions in one year to maximize the benefit.

Taxpayers whose medical expenses do exceed the income limitation should also make sure they do not overlook any deductible medical expense.

Long-Term Care

Amounts paid for long-term care services and certain premiums paid on long-term care insurance are deductible as medical expenses on Schedule A. Costs of care provided by a relative who is not a licensed professional or by a related corporation or partnership don't qualify. The maximum amount of long-term care insurance premiums treated as medical depends on the insured's age and is inflation-indexed annually. The following are the deductible amounts for the past few years. If the taxpayer paid long-term care premiums and qualifies for a medical deduction on Schedule A of their tax return and did not include them in their medical deduction, the return can be amended to include the deduction. Please call this office to see if the deduction will make a difference and to have us prepare the amended returns.


Deduction Limitations
Age
2014
2015
2016
2017
40 or less
370
380
390
410
41 to 50
700
710
730
770
51 to 60
1,400
1,430
1,460
1,530
61 to 70
3,720
3,800
3,900
4,090
71 & older
4,660
4,750
4,870
5,110
Per Diem
330
330
340
360


Employees generally won't be taxed on the value of coverage under employer-provided long-term care plans. However, the exclusion doesn't apply if coverage is provided through a cafeteria plan. In addition, long-term care services can't be reimbursed tax-free under a flexible spending account. 

The "long-term care contract" is an insurance contract that provides only coverage of long-term care and meets certain other requirements. Some long-term care riders to life insurance will also qualify. Benefits under a long-term care policy (other than dividends or premium refunds) are generally tax-free. For per-diem contracts that pay a flat-rate benefit without regard to actual long-term care expenses incurred, the inflation adjusted exclusion is limited to $360 a day in 2017 (up from $340 in 2016), except when long-term care costs incurred are more than the flat rate and are not otherwise compensated by some other means.

A contract isn't treated as a qualified long-term care contract unless the determination of being chronically ill takes into account at least five activities of daily living: eating, toileting, transferring, bathing, dressing and continence.

"Long-term care services" include necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, maintenance or personal care services prescribed by a licensed practitioner for the chronically ill.

A "Chronically ill person" is one who has been certified by a licensed healthcare practitioner within the previous 12 months as: (1) unable to perform at least two activities of daily living (eating, toileting, transferring, bathing, dressing, continence) without substantial assistance for a period of 90 days due to loss of functional capacity, (2) having a similar level of disability as determined in regulations, or (3) requiring substantial supervision to protect from threats to health and safety due to severe cognitive impairment. The requirement that a qualified long-term care insurance contract must base its determination of whether an individual is chronically ill by taking into account five activities of daily living applies only to (1) above (being unable to perform at least two activities of daily living).


Smoking Cessation Programs

The IRS has ruled that unreimbursed amounts paid by taxpayers for participation in smoking-cessation programs and for prescribed drugs designed to alleviate nicotine withdrawal are expenses for medical care that are deductible subject to the AGI limitation. However, because of the prohibition of deductions for most non-prescription drugs, no deductions are permitted for the costs of nonprescription nicotine gum and certain nicotine patches.

Weight Loss & Obesity Medical Deductions

The expenses for certain weight-loss programs may be deducted as a medical expense. In order for uncompensated amounts paid by individuals for participation in a weight-loss program to be deductible, the program must be undertaken as treatment for a specific disease or diseases (including obesity) diagnosed by a physician. The costs are not deductible by taxpayers who participate in weight-loss programs to improve their general health or appearance.

The tax code treats obesity as a disease, and thus you can include in medical expenses amounts paid to lose weight if it is a treatment for a specific disease diagnosed by a physician. This includes fees paid for a membership in a weight reduction group and attendance at periodic meetings.

However, you cannot deduct the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. You can include the cost of special food in medical expenses only if:


1. The food does not satisfy normal nutritional needs,
2. The food alleviates or treats an illness, and
3. The need for the food is substantiated by a physician.

The amount you can include in medical expenses is limited to the amount by which the cost of the special food exceeds the cost of a normal diet.

The question always arises: why is the cost of the dietary meals and supplements not deductible? Recently, an individual who sells dietary meals and supplements wrote to his representative in Congress asking that very question. The Congressman raised this question with the IRS Office of Chief Counsel. The Chief Counsel's office responded with the following:

The tax code provides a deduction for expenses paid for medical care of the taxpayer, his spouse, or a dependent; to the extent such expenses exceed the adjusted gross income. The tax code defines the term “medical care” as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

The code provides that no deduction shall be allowed for personal, living, or family expenses. Food is a personal item. Therefore, the cost of food is nondeductible. Meal replacements, diet foods, and supplements are substitutes for the food individuals normally consume. The costs of these items are nondeductible personal expenses under the tax code.

Based on the tax code, as outlined in the response above, IRS Publications and rulings generally take a very restrictive view of this deduction. Thus, in addition to no deduction being allowed for dietary meals and supplements, no portion of membership dues paid to a gym, health club or spa qualifies as a deductible medical expense in any case—even if the individual joined on the advice of a physician to lose weight to combat a disease.

If you have questions regarding this or other possible medical deductions, please give this office a call.

Medical Travel Expenses

Auto Travel - Deduction is allowed at a specified cents per mile rate (see table) or for actual cost of gas and oil (not repairs, maintenance, depreciation, lease fees, etc.) when a vehicle is used for medical care purposes.

Year
2013
2014
2015
2016
Rate
24.0
23.5
23.0
19.0
        
Trips- Amounts paid for transportation to another city may be included in medical expenses, if the trip is primarily for, and essential to, receiving medical services. Up to $50 per night for lodging may be included. A trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health cannot be included in medical expenses, even if the trip is made on the advice of a doctor.

Lodging
- The cost of meals and lodging at a hospital or similar institution may be included if the main reason for being there is to receive medical care. Medical expenses may also include the cost of lodging not provided in a hospital or similar institution. The cost of such lodging while away from home may be included if all of the following requirements are met:

1. The lodging is primarily for and essential to medical care.

2. The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital.

3. The lodging is not lavish or extravagant under the circumstances.

4. There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. The amount included in medical expenses for lodging cannot be more than $50 for each night for each person. Lodging is included for a person for whom transportation expenses are a medical expense, because that person is traveling with the person receiving the medical care. For example, if a parent is traveling with a sick child, up to $100 per night is included as a medical expense for lodging. Meals are not deductible.

Meals - Meals are generally not deductible as a medical expense except as part of inpatient care. As such, they would be included in the cost of the hospital or other medical facility.

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