Medical expense payments made by an adopting parent for medical services rendered to a child even before the child was placed in the parent's home are deductible if: 

• The child is a dependent of the adopting parent when services are rendered or paid, and 
  
  
• The expenses are paid by the parent, or agent, for the medical care of the child, and
  
  
• They are not reimbursement for expenses by the adoption agency prior to adoption negotiations, and
  
  
• The expenses are shown to be directly attributable to the medical care of the child. 

Adoptive parents cannot deduct the natural mother's childbirth expenses. 

Generally, cosmetic surgery is not a deductible medical expense. Cosmetic surgery is defined as any procedure, which is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. 

However, cosmetic surgery or other similar procedures can be taken into account as a medical expense, if the surgery or procedure is necessary to ameliorate a deformity arising from or directly-related to a:

(1) Congenital abnormality, 

(2) Personal injury resulting from an accident or trauma, or 

(3) Disfiguring disease.

Medical Dependents - Medical expenses paid for dependents may be deducted. To claim these expenses, the person must have been a dependent either at the time the medical services were provided, or at the time the expenses were paid. A person generally qualifies as a medical dependent for purposes of the medical expense deduction if:

1. That person lived with the taxpayer for the entire year as a member of the household or is related,

2. That person was a U.S. citizen or resident, or a resident of Canada or Mexico for some part of the calendar year in which the tax year began, and 

3. The taxpayer provided over half of that person's total support for the calendar year. Medical expenses of any person who is a dependent may be included, even if an exemption for him or her cannot be claimed on the return.

Child of Divorced or Separated Parents - If either parent can claim a child as a dependent under the rules for divorced or separated parents, each parent can include the medical expenses he or she pays for the child. This is true even if the other parent claims the exemption for the child.

Support Claimed Under a Multiple Support Agreement - A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Whoever is considered to have provided more than half of a person's support under such an agreement can deduct medical expenses paid.

Any medical expenses paid by others who joined in the agreement cannot be included as medical expenses by anyone.

You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for alcohol or drug addiction. This includes meals and lodging provided by the center during treatment.

You can also include in medical expenses transportation costs you pay to attend meetings of an Alcoholics Anonymous Club in your community, if your attendance is pursuant to medical advice that membership in the Alcoholics Anonymous Club is necessary for the treatment of a disease involving the excessive use of alcoholic liquors.

With people living longer, many find themselves becoming the care provider for elderly parents, spouses and others who can no longer live independently. When this happens, questions always come up regarding the tax ramifications associated with the cost of nursing homes or in-home care.

Generally, the entire cost of nursing homes, homes for the aged, and assisted living facilities are deductible as a medical expense, if the primary reason for the individual being there is for medical care or the individual is incapable of self-care. This would include the entire cost of meals and lodging at the facility. On the other hand, if the individual is in the facility primarily for personal reasons, then only the expenses directly related to medical care would be deductible and the meals and lodging would not be a deductible medical expense.

As an alternative to nursing homes, many care providers are hiring day help or live-in employees to provide the needed care at home. When this is the case, the services provided by the employees must be allocated between household chores and deductible nursing services. To be deductible, the nursing services need not be provided by a nurse so long as the services are the same services that would normally be provided by a nurse such as administering medication, bathing, feeding, dressing etc. If the employee also provides general housekeeping services, then the portion of employee's pay attributable to household chores would not be a deductible medical expense. 

Household employees, like other employees, are subject to Social Security and Medicare taxes, and it is the responsibility of the employer to withhold the employee's share of these taxes and to pay the employer's payroll taxes. Special rules for household employees greatly simplify these payroll withholding and reporting requirements and allow the Federal payroll taxes to be paid annually in conjunction with the employer's individual 1040 tax return. Federal income tax withholding is not required unless both the employer and the employee agree to withhold income tax. However, the employer is still required to issue a W-2 to the employee and file the form with the Federal government. A Federal Employer ID Number and a state ID number must be obtained for reporting purposes. Most states have special provisions for reporting and paying state payroll taxes on an annual basis that are similar to the Federal reporting requirements.

If you need assistance in setting up a household payroll, please contact this office for additional details and filing requirements.

Amounts paid for special equipment installed in the home or for improvements may be included in medical expenses, if their main purpose is medical care for the taxpayer, the spouse, or a dependent. The cost of permanent improvements that increase the value of the property may be partly included as a medical expense. The cost of the improvement is reduced by the increase in the value of the property. The difference is a medical expense. If the value of the property is not increased by the improvement, the entire cost is included as a medical expense.

Certain improvements made to accommodate a home to a taxpayer's disabled condition, or that of the spouse or dependents who live with the taxpayer, do not usually increase the value of the home and the cost can be included in full as medical expenses. These improvements include, but are not limited to, the following items:

• Constructing entrance or exit ramps for the home,
• Widening doorways at entrances or exits to the home,
• Widening or otherwise modifying hallways and interior doorways,
• Installing railings, support bars, or other modifications,
• Lowering or modifying kitchen cabinets and equipment,
• Moving or modifying electrical outlets and fixtures,
• Installing porch lifts and other forms of lifts but generally not elevators,
• Modifying fire alarms, smoke detectors, and other warning systems,
• Modifying stairways,
• Adding handrails or grab bars anywhere (whether or not in bathrooms),
• Modifying hardware on doors,
• Modifying areas in front of entrance and exit doorways, and
• Grading the ground to provide access to the residence. Only reasonable costs to accommodate a home to a disabled condition are considered medical care. Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses.

You can include in medical expenses insurance premiums you pay for policies that cover medical care. Policies can provide payment for:

• Hospitalization, surgical fees, x-rays, etc.,
• Prescription drugs,
• Replacement of lost or damaged contact lenses,
• Membership in an association that gives cooperative or so-called "free-choice" medical service or group hospitalization and clinical care, and
• Qualified long-term care insurance contracts (subject to additional limitations). 

Pre-tax dollars - You cannot deduct insurance premiums paid with pre-tax dollars because the premiums are not included in your wages. If you have a policy that provides more than one kind of payment, you can include the premiums for the medical care part of the policy.

Employer-sponsored health insurance plan - Do not include in your medical any insurance premiums paid by your employer-sponsored health insurance plan, unless the premiums are included in your wages.

Medicare B - Medicare B is a supplemental medical insurance. Premiums you pay for Medicare B are a deductible medical expense.

Prepaid insurance premiums - Premiums you pay before you are age 65, for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65, are medical care expenses in the year paid, if they are:

1) Payable in equal yearly installments, or more often, and
2) Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years).

You cannot include premiums you pay for:

• Life insurance policies,
• Policies providing payment for loss of earnings,
• Policies for loss of life, limb, sight, etc.
• Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury, or
• The part of your car insurance premiums that provides medical insurance coverage for all persons injured in or by your car because the part of the premium for you, your spouse, and your dependents is not stated separately from the part of the premium for medical care of others.

Taxpayers can only deduct medical expenses if they itemize their deductions. In addition, medical expenses are only deductible if they exceed 7.5% of a taxpayer’s income (AGI), and then only the amount that exceeds that income limit is actually deductible. The income limit is a higher 10% for those taxpayers subject to the alternative minimum tax (AMT).

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.

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 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	2003	2004	2005	2006
40 or less	250	260	270	280
41 to 50	470	490	510	530
51 to 60	940	980	1,020	1,060
61 to 70	2,510	2,600	2,720	2,830
71 & older	3,130	3,250	3,400	3,530
Per Diem	220	230	240	250

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 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 after '96 (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 $250 a day (2006), 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).

 

Wages and other amounts paid for nursing services can be included in medical expenses. Services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. These services can be provided in the home or another care facility.

Generally, only the amount spent for nursing services is a medical expense. If the attendant also provides personal and household services, these amounts must be divided between the time spent performing household and personal services and the time spent for nursing services. However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. 

Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow the taxpayer to work may qualify for the child and dependent care credit. Part of the amounts paid for that attendant's meals are also included in medical expenses. Divide the food expense among the household members to find the cost of the attendant's food. If additional amounts for household upkeep were paid because of the attendant, include the extra amounts with the medical expenses. This includes extra rent or utilities paid because a larger apartment was needed to provide space for the attendant.

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 7.5%-of-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.

You can include in medical expenses payments to a special school for a mentally impaired or physically disabled person, if the main reason for using the school is its resources for relieving the disability. You can include, for example, the cost of:

• Teaching Braille to a visually impaired child,
• Teaching lip reading to a hearing impaired child, or
• Giving remedial language training to correct a condition caused by a birth defect.

The cost of meals, lodging, and ordinary education supplied by a special school can be included in medical expenses only if the main reason for the child's being there is the resources the school has for relieving the mental or physical disability. You cannot include in medical expenses the cost of sending a problem child to a special school for benefits the child may get from the course of study and the disciplinary methods.

Surrogate mother expenses are not specifically addressed in the Tax Code or Regulations. However, the Code does tell us that medical expenses are only deductible for the taxpayer, spouse and dependents. The definition of a dependent for medical purposes ignores the gross income and joint return tests. Therefore, it appears that a surrogate mother's medical expenses can only be deducted if she qualifies as a "medical dependent." The unborn fetus is not a dependent until actually born.

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 not the cost of the dietary meals and supplements 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 Counsels 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 7.5 percent of 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, 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.

The following is a checklist of medical expenses. The list is by no means all-inclusive and some of the deductions listed may have additional restrictions not included here. Please call this office with questions regarding these or other potential medical deductions.

Ambulance Artificial Limb Artificial Teeth Birth Control Pills Braille Books and Magazines Abortion - Legal Acupuncture Alcoholism Chiropractor Christian Science Practitioner Contact Lenses Crutches Decedent's Medical Expenses Dental Treatment Drug Addiction Eyeglasses Fertility Enhancement Guide Dog Hearing Aids Hospital Services Impairment-Related Expenses Insurance Premiums Laboratory Fees Laser Eye Surgery

Lead-Based Paint Removal Learning Disability Medical Services Medicines - Prescribed Mentally Retarded, Special Home Nursing Home Nursing Services Operations Optometrist Organ Donors Osteopath Oxygen Prosthesis Psychiatric Care Psychoanalysis Psychologist Special Schools and Education Sterilization Stop Smoking Programs Surgery Therapy Vasectomy Weight-Loss Program Wheelchair

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.)

Year	2008	2009
Rate	Jan - June 19.0 July - Dec 27.0	24.0

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.