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February 5, 2003

Maximizing your medical deductions

From: - 05 Feb 2003

By Kay Bell •

Medical costs seem to go up every year. There is a way to get your Uncle Sam to foot some of the doctor bills, but you need to make sure you know and follow the rules.

The Internal Revenue Service lets you deduct medical costs as long as they are more than 7.5 percent of your adjusted gross income. This percentage may seem unattainable upon first glance, but with a little tax triage you might just meet it.

Don't overlook the medical expenses of everyone listed on your tax return. Medical and dental bills for you, your spouse and your dependents count toward reaching the allowable deduction limit. And while it's not something we want to think about, this even includes the medical bills you paid for a deceased dependent in the year they were paid, whether before or after the person passed away.
Overlooked medical costs
Once you're confident you know just whose costs are covered, make sure you don't miss one. Some allowable, but often overlooked, medical deductions include:

* Travel expenses to and from medical treatments. The IRS evaluates the standard cents-per-mile allowance each year, so check its Web site for the current rate.
* Insurance payments from already taxed income. This includes the cost of long-term care insurance, up to certain limits based on your age.
* Uninsured medical treatments such as an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs.
* Costs of alcohol or drug abuse treatments can be counted on your Schedule A.
* Laser vision corrective surgery is a tax-allowable procedure.
* Medically necessary costs prescribed by a physician. That means if your doctor told you to get an air conditioner to relieve your allergies, the A/C unit (and additional electricity costs to operate it) are deductible.
* Some medical conference costs. You can count admission and transportation expenses to the conference if it concerns a chronic illness suffered by you, your spouse or a dependent. Meal and lodging costs while at the seminar, however, are not deductible.

And health conscious taxpayers have a friend in the IRS. Weight-loss programs in some instances now may count as a deductible medical expense, joining the stop-smoking programs the agency OK'd a couple of years ago.

But don't try to cheat on your calorie intake or the IRS. The diet program must be medically necessary. Acceptable situations include, for example, when a doctor recommends the regimen to reduce the health risks of obesity or hypertension.

Special medial needs
If you have special needs, there are even more costs you can write off. Take into account the cost of a wheelchair, crutches and equipment that enables a deaf person to use the telephone or that provides television closed-captioning. Don't forget your seeing-eye or hearing-impaired dog, or the costs to retrofit your car with special hand controls or create a space to hold a wheelchair.

Changes to your home to make it more accessible for a handicapped resident also are allowable. They include:

* Installing a stairway chair lift and adding ramps
* Widening doors and hallways and lowering counters and cabinets
* Adjusting electrical outlets and fixtures
* Grading exterior landscape to ease access to the house

Elevators, however, generally aren't deductible. The IRS considers this a structural change that could increase the value of your house and, therefore, doesn't allow it as a medical deduction.

Household help to care for you or an ailing dependent isn't deductible either, even if it's recommended by your doctor. (Do check, however, on whether you qualify for the dependent care credit.)

Medical, but not tax deductible
Uncle Sam does set some additional medical deduction limits. As a general rule, he doesn't care how we look.

Cosmetic surgery, health club dues or costs of a weight loss program that is not medically necessary aren't deductible.

Neither are hair transplant operations or, at the other extreme, electrolysis treatments.

And don't try to write off that expensive bottled water you have delivered each week. Sure H2O is critical to good health, but the tax collector thinks your tap water will suffice.

For a complete list of what the IRS will and won't allow you to count toward your medical deductions, check out Publication 502. You may find a few things there that apply to you -- maybe just enough to get you over that 7.5 percent deduction hurdle.

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