Tylenol(tm), Advil(tm), and aspirin may relieve common aches and pains, but what relief is there for the maladies caused by high medical expenses? According to the Georgia Society of CPAs, Uncle Sam offers some relief by allowing you to deduct unreimbursed medical expenses to the extent that they, exceed 7.5 percent of your adjusted gross income (AGI). This means if your family has an AGI of $60,000, you may deduct any qualified medical expenses that exceed $4,500.

Though it may seem like it's next to impossible to reach this threshold, there are a variety of deductible medical expenses that may surprise you. Expenditures such as smoking cessation programs, the new drug Viagra, and childbirth classes, are all deductible. For this reason, it's wise to add up what you spent and consult with your CPA before signing off on your tax return.

In tallying your medical expenses, keep in mind that you're allowed to deduct eligible medical expenses for yourself, your spouse (if you file jointly), and your dependents. Your dependents can include children and other relatives such as parents, grandparents, and siblings -- as long as you provide more than half of their support and meet certain other provisions. Here are some other expenses to include in your tally.

INSURANCE PREMIUMS
All health insurance premiums should be on your list of deductible expenses. Be sure to add in any automatic withdrawals taken from your paycheck. Uncle Sam allows deductions for insurance covering hospitalization, surgery, dental care, optometrists, ophthalmologists, prescription drugs, contact lens replacement, acupuncturists, and membership in a cooperative health maintenance program (HMO) or other medical associations. Medicaid premiums, which many elderly tend to overlook, also are deductible. Just remember, you cannot deduct payments that have already been reimbursed by insurance.

Self-employed individuals cannot deduct company-provided health insurance for themselves, spouses, and dependents as a business expense. They can,instead, deduct a portion of their medical insurance costs as an adjustment to gross income. However, there is a limit to this deduction. For 1999, only 60 percent of a person's insurance premiums can be deducted as an adjustment to gross income. The balance of the premiums must be treated as an itemized medical expense, which is subject to the 7.5 percent threshold. The percentage limit on premium deductions is scheduled to increase to 100 percent in 2003.

HOME IMPROVEMENTS
Uncle Sam allows you take a tax deduction for medically related improvements to your home. However, the deduction is limited to the amount that the cost of the improvement exceeds the increase to the value of your home. For example, if adding a swimming pool for medical purposes costs you $15,000 to install, but increases the value of your home by $10,000, your deduction would be limited to $5,000. Modifications that may not be considered improvements -- such as wheelchair ramps, custom doorways, and special railings -- may be fully deductible, subject to the 7.5 percent limitation.

MEDICAL EQUIPMENT
Certain types of medical equipment, such as false teeth, hearing aids, leg or back braces, prosthetics, and even special mattresses, can be expensive and are not always covered by insurance -- even when prescribed by a doctor. As long as you meet the 7.5 percent threshold, you can deduct the costs of these unreimbursed expenses.

TRAVEL AND LODGING
If you are required to make routine visits to a physician for treatment of an illness, injury, or disease, your transportation costs can add up. Keep track of these because Uncle Sam may help. Transportation costs to a place where you receive medical treatment, whether you drive, travel by cab, or take a train, bus or plane also may be tax deductible (You may deduct 10 cents per mile plus such expenses as parking fees and tolls). Additionally, if your condition requires treatment from a doctor in a hospital or a hospital-related facility, lodging costs also may be deductible.

LONG-TERM CARE
Qualified medical expenses also include long-term care costs for yourself, a spouse, or dependent. These qualifying expenses are generally for those who are chronically ill and need diagnostic preventive, therapeutic, and rehabilitative treatments. All such services must be prescribed by a licensed health-care provider.

NURSES' WAGES
Wages paid to nurses for medical reasons are deductible. Responsibilities such as bathing, administering medication, and changing dressings are all considered qualifying tax deductions. However, housecleaning and other domestic services are not tax deductible.

MAXIMIZE YOUR DEDUCTIONS
Remember, qualified medical expenses are deductible in the year that they're incurred and paid. So, on your 1999 tax return, you can only deduct those expenses paid by December 31, 1999. If you put charges on your credit card by that date, they also may qualify for a deduction.

Keep in mind, too, that how you file also can impact your ability to claim the medical deduction. By filing separately, the 7.5 percent floor applies to each spouse's individual return. Therefore, if both spouses work, and one of you has substantial medical expenses, filing separate returns may offer one of you a medical tax deduction. CPAs suggest calculating your taxes both ways to determine which is most beneficial.

The GSCPA is the premier professional organization for CPAs in the state of Georgia. With over 9,900 members throughout the state, the purpose of the GSCPA is to promote the study of accountancy and applicable laws, provide continuing professional education, maintain high ethical and work standards, and provide information about accounting issues to the membership and the public. For more information, access our web site at www.gscpa.org

Back to Business Home Page | Back to the top of the page