When it comes to health care costs, understanding tax-savvy ways to cover your medical bills is already pretty perplexing. But tax strategy gets even hazier when you throw alternative medications such as acupuncture, chiropractic services and medical marijuana into the mix.
Which off-the-beaten-path medical treatments are tax-deductible? Here's what to know about deducting unconventional medical treatments from your tax return.
Discover ways to write off medical expenses. In order to deduct qualified health care costs from your tax bill, you have to meet certain criteria. The Internal Revenue Service, or IRS, allows filers to write off health care expenses that exceed 10 percent of their adjusted gross income, or AGI. (For the 2016 tax year, filers over age 65 can write off medical costs that exceed just 7.5 percent). So, you must have fairly high health care bills -- or a low salary -- to qualify. In addition, you must itemize your deductions, which means that you can't take the standard deduction.
Filers who don't meet those eligibility guidelines need not despair. They may take advantage of other tax-savvy strategies to reduce their medical costs, including covering eligible medical expenses through a flexible spending account, or FSA, or contributing to a health savings account, or HSA. Just remember: Costs covered under these savings plans -- or reimbursed by insurance -- can't also be deducted from your taxes. "You cant double dip in that way," says Barbara Weltman, an attorney and contributor to "J.K. Lasser's Your Income Tax 2017: For Preparing Your 2016 Tax Returns."
Alternative therapies. When it comes to unconventional medical treatments, "you can deduct a whole lot of interesting things," says Eva Rosenberg, a Los Angeles-based enrolled agent, known as the TaxMama.
In general, the IRS won't let you deduct over-the-counter medications, Rosenberg says. But treatments that have been prescribed by a doctor or medical professional may be allowable. You can even write off gas and parking bills accrued while driving to doctor's appointments and the pharmacy. If you plan to deduct medical costs, make sure to keep any receipts and mileage records.
If you want to examine whether a specific treatment is deductible, head to the IRS' publication 502, which provides a robust list of deductible and nondeductible health care expenses. Examples of acceptable medical treatments include:
-- Christian Science practitioners.
-- Costs for inpatient medical expenses to treat drug addiction.
-- Certain fertility treatments.
-- Weight-loss programs (for certain costs, if used to treat a specific disease diagnosed by a physician).
Some expenses that aren't allowed include:
-- Cosmetic surgery.
-- Dancing lessons.
-- Maternity clothes.
-- Nonprescription drugs (except for insulin).
If a medical treatment is allowed or forbidden on the form, then you know whether it's deductible. If it's not mentioned, then making the call is a little more complicated.
For example, writing off Reiki, a healing method that harnesses energy to help the body heal, isn't expressly allowed -- or forbidden -- on form 502. So, if you have a prescription from a licensed professional to use the therapy to treat an ailment, you may be able to write it off your tax bill. "If you get a doctor to prescribe it ... (and it) is relatively acceptable, you'll be able to get away with a deduction," Rosenberg says.
Medical marijuana. If you want to deduct medicinal marijuana from your taxes, you won't have much luck on your federal tax return. "You can't include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile [also known as amygdalin], etc.) that aren't legal under federal law, even if such substances are legalized by state law," according to the IRS form 502. On the federal level, marijuana is still considered a Schedule I drug.
But if it's legal in your state, you may be able to take a medical marijuana deduction on the state return. It's a gray area, says Juan Montes, enrolled agent with TheTaxProblem.com, a firm with offices in Ceres and San Jose, California. "I could find nothing on the state side that would bar a deduction," he says.
Today, 27 states and the District of Columbia allow for medical marijuana and cannabis programs, according to the National Conference of State Legislatures. So, if you live in a state where it's legal, and you're willing to take a risk, you could claim medical marijuana that has been prescribed by a doctor as a deduction on your state return. Just be aware, Montes says, that if your deduction is ever challenged through an audit and found to be disallowed, you could pay a price. In California, for example, you could lose the deduction and pay a 20 percent penalty for inaccurately filing your taxes.
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