Eligible medical expenses are any costs incurred in the prevention or treatment of injury, disease, or in the case of dyslexia, learning disabilities. Medical expenses include health and dental insurance premiums (unless paid through a pre-tax plan), doctors and hospital visits, co-pays and prescription drugs to name just a few. Generally, medical expenses do not include school tuition and related costs. That is, unless, the child has dyslexia, and then expenditures include items such as school tuition, transportation, lodging and meals, professional consultations, evaluations and other forms of mental health treatment.
To increase chance of success if challenged by the IRS, your doctor should recommend that special treatments, including schooling, is needed to treat the learning disability. Additionally, the primary reason your child is attending the specific school is for medical care and not because the school addresses behavior problems that might not qualify as learning disabilities.
So, you have paid (i.e. in “cash”, by credit card, or through a loan) for eligible medical expenditures, this entitles you to claim a medical deduction on your tax return, correct? Not quite, as mentioned above, this is just the first step, the second (and more difficult) step, is to have eligible medical expenses that in total exceed “7.5%-of-AGI” (your income less certain other non-itemized deductions)
As AGI differs among taxpayers, so too does the calculated threshold for determining the medical deduction amount that will be included as an itemized deduction. Additionally, due to new tax reform changes affecting itemized deductions, such as, capping the state tax deduction, and elimination of certain other itemized deductions, it might be more tax advantageous to claim the new higher standard deduction in calculating your taxable income. However, by not itemizing your deductions, you no longer are eligible for a Federal medical deduction, and similarity a deduction on your Massachusetts state tax return.
Ok, But What About Prior Years??
Good news, prior years are potentially not lost. If you paid for medical expenditures related to your child’s medical condition and did not claim (when you could have) a medical deduction in prior years you might be able to file an amended tax return to correct your mistake. Just like in the current year, a case-by-case analysis needs to be done when going back to a prior year, to determine if amending a return will in fact provide you with a greater tax benefit.
For more information on the above subject matter please contact the author of this article directly at:
Adam M. Domow CPA
*The information included in this article is provided for reference by a party unaffiliated with Eagle Hill. Each tax scenario is unique. Please consult with your tax professional for information and guidelines specific to your personal tax circumstance.