Getting to know how medical deductions affect care
Last month, I gave a presentation to the Santa Fe ALS support group on medical deduction changes under the new federal tax law for people with disabilities.
The group is sponsored by the New Mexico Chapter of the ALS Association, which provides education and support for people living with amyotrophic lateral sclerosis, a progressive neurodegenerative disease that affects nerve cells in the brain and spinal cord.
Initially, medical deductions were excluded from the tax legislation, but Republican Sen. Susan Collins of Maine, in exchange for going along with the overhaul, was able to negotiate the continuation of the medical expense deduction and a lower expense threshold — at least temporarily.
Previously, the IRS allowed tax filers to deduct medical expenses over 10 percent of their adjusted gross income. The Tax Reform Act of 2017 temporarily changed the threshold to 7.5 percent beginning Jan. 1, 2017, and ending Dec. 31, 2018.
About 8.8 million Americans, 49 percent of them with incomes under $50,000, used the medical expense deduction in 2015, saving themselves a combined $86.9 billion, according to the AARP Public Policy Institute.
Medical expenses include costs to diagnose, cure, mitigate, treat or prevent disease that affects any part or function of the body, according to IRS documents.
These expenses include payments for all legally recognized medical services rendered by physicians, dentists and other medical practitioners.
Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness, and may include the costs of equipment, supplies, devices and vehicle modifications needed for such purposes, according to the IRS.
The premiums you pay for health insurance and qualified long-term care, and the amounts you pay for transportation and lodging to get medical care, are also taxdeductible.
The cost of unreimbursed personal care for assistance with eating, using the toilet, bathing and dressing, as well as costs of protection from threats to health and safety, are also medical expenses that can be deducted under the tax code.
One of the most overlooked medical expense deductions is a home improvement that is needed because of a disability or health condition.
The IRS will approve special equipment installed in the home for you, your spouse, a dependent or a qualifying relative.
Home improvements must be reasonable and can include, but aren’t limited to, constructing entrance or exit ramps, widening doorways, widening or otherwise modifying hallways, installing railings, support bars or other modifications to bathrooms, lowering or modifying kitchen cabinets and equipment, moving or modifying electrical outlets and fixtures, installing porch lifts and other forms of lifts, modifying fire alarms, smoke detectors and other warning systems; modifying stairways, and grading the ground to provide access to the residence.
Generally, the costs of these types of home improvements will not increase the value of your property, but if they do, they may be only partly included as a medical expense, according to IRS.
These deductions are also available for renters. As an example, an IRS document cites an individual with arthritis and a heart condition who was unable to climb the stairs to the second-floor bathroom of his rented apartment. With the landlord’s approval, he installed a new shower stall in a first-floor bathroom. The landlord didn’t pay any of the costs for the remodel or reduce the rent, and the taxpayer was able to deduct the entire amount he paid for the construction.
A stair lift also could have been a solution and a reasonable medical expense for this taxpayer.