Updated June 01, 2014.
You can deduct unreimbursed medical expenses which exceed 7.5 % of your Adjusted Gross Income if you itemize deductions.
Since you must exceed the 7.5% limitation, a critical strategy for maximizing medical expenses is known as "bunching". The idea is to pay as many medical bills in one year as possible. Once your medical bills for the year exceed the 7.5% limitation, all expenses above that amount are fully deductible.
You want to make all payments possible in that year rather than waiting until the next year when you again must exceed 7.5 %. With bunching you generally adopt a two-year strategy. One year you pay all the expenses you can and take the deductions, while the next year you only pay the expenses that must be paid because you probably will not exceed the 7.5% limitation the second year. Plan ahead to take advantage of as many deductions as possible.
A deductible medical expense is any cost of diagnosis, cure, mitigation, treatment, or prevention of a specific disease or any treatment that affects a part or function of the body. Costs must be for a specific ailment and not just for general health improvement. The diagnosis of arthritis expands the list of possible allowable medical deductions. A wide array of expenses are deductible. The easy-to-identify expenses include:
Please see IRS Publication 502 for a complete list of expenses which may and may not be deducted. The following lesser known arthritis-related medical expenses may be deductible:
If swimming is prescribed as treatment or physical therapy, the cost of constructing a home swimming pool may be partly deductible as a medical expense. However, the IRS is likely to question the deductions because of the possibility that the pool may be used for recreation. If you can show that the pool is specially equipped to alleviate your condition and is not generally suited for recreation, the IRS will likely allow the deduction. For example, the IRS allowed a deduction for a pool constructed by an osteoarthritis patient. His physician prescribed swimming several times a day as treatment. He built an indoor lap pool with specially designed stairs and a hydrotherapy device. Given these features, the IRS concluded that the pool was specially designed to provide medical treatment.
You can deduct unreimbursed medical expenses which exceed 7.5 % of your Adjusted Gross Income if you itemize deductions.
Making the Most of Medical Deductions
Since you must exceed the 7.5% limitation, a critical strategy for maximizing medical expenses is known as "bunching". The idea is to pay as many medical bills in one year as possible. Once your medical bills for the year exceed the 7.5% limitation, all expenses above that amount are fully deductible.
You want to make all payments possible in that year rather than waiting until the next year when you again must exceed 7.5 %. With bunching you generally adopt a two-year strategy. One year you pay all the expenses you can and take the deductions, while the next year you only pay the expenses that must be paid because you probably will not exceed the 7.5% limitation the second year. Plan ahead to take advantage of as many deductions as possible.
Allowable Medical Expenses
A deductible medical expense is any cost of diagnosis, cure, mitigation, treatment, or prevention of a specific disease or any treatment that affects a part or function of the body. Costs must be for a specific ailment and not just for general health improvement. The diagnosis of arthritis expands the list of possible allowable medical deductions. A wide array of expenses are deductible. The easy-to-identify expenses include:
- doctor's fees
- hospital costs
- laboratory bills
- prescription medications
- health care premiums
- travel costs for obtaining medical care
Other Expenses
Please see IRS Publication 502 for a complete list of expenses which may and may not be deducted. The following lesser known arthritis-related medical expenses may be deductible:
- Crutches, splints, braces, walker, scooter, wheelchair, and other medical equipment.
- Extra cost of orthopedic shoes over normal shoes.
- Reclining orthopedic lift chair.
- Special mattress and plywood bed boards for relief of arthritis. (Revenue Ruling 68-212)
- Adaptive aids and assistive devices Costs or extra costs above "normal" items such as: heat and ice packs, exercise equipment, large grip kitchen utensils, reachers, grabbers, dressing and bathing aids.
- Treatment by acupuncturist, chiropractors, osteopaths, indian medicine man or Christian Science practitioners.
- Hydrotherapy (water treatments), injections, and x-ray treatments.
- The cost of adapting a car or home to limited abilities.
- Capital improvements to property when primary purpose is medical need (examples: swimming pool, hottubs, swim spa, elevator, special lifts) are deductible only to the extent the cost exceeds the increase in value of the property. The actual increase in value to the home is best determined by an appraisal. Expenses incurred to adapt a residence for a physical handicap such as ramps, support bars, special door knobs and fixtures are presumed not to increase the value of a home and are fully deductible.
- When Are Home Improvements Tax Deductible?
- Detachable home installations such as air conditioners, heaters, humidifiers, air cleaners, and whirlpools used for the benefit of a sick person.
- Special cover-all makeup to alleviate the mental stress caused by lupus rashes.
- Medically unproven arthritis treatments are generally deductible since the IRS has taken the position that it cannot make judgments in the medical field. Payments to an unlicensed practitioner are deductible if the type and quality of their services are not illegal.
- Operating and maintenance costs for capital assets such as a pool, spa, heater, air cleaner, etc. in terms of the water, electricity, cleaning, repairs, maintenance and chemicals required are hidden costs which are deductible. All the costs are deductible even if none or only a portion of the capital asset was deductible.
- A weight control program recommended by your doctor to reduce the stress on arthritic joints. However, deductions allowed for special diet foods may be restricted.
- Can Food, Diet Foods or Weight-Loss Programs Be Tax Deductible?
Deducting Cost of Swimming Pool
If swimming is prescribed as treatment or physical therapy, the cost of constructing a home swimming pool may be partly deductible as a medical expense. However, the IRS is likely to question the deductions because of the possibility that the pool may be used for recreation. If you can show that the pool is specially equipped to alleviate your condition and is not generally suited for recreation, the IRS will likely allow the deduction. For example, the IRS allowed a deduction for a pool constructed by an osteoarthritis patient. His physician prescribed swimming several times a day as treatment. He built an indoor lap pool with specially designed stairs and a hydrotherapy device. Given these features, the IRS concluded that the pool was specially designed to provide medical treatment.
Go on to Part 2 --- Arthritis and Your Income Taxes --->
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