Your health – and how it affects your taxes!

Posted on January 26, 2010

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Many of us are now 3 weeks into working on our New Year’s Resolutions. Did you make one of the more popular decisions, like improving our finances or your own health?

The Mayor’s Health Line would like to share a few tips for you to lower your weight and your 2010 tax liability… at the same time!

What about the effects of 2009? Firstly, if you faced any major health and wellness expenses last year, you may be able to lower your 2009 taxes this April 15th!

The Internal Revenue Service (IRS) allows tax breaks for a long list of medical and dental expenses. This includes breaks for you, your spouse and any of your dependents under age 21.  However, be sure to know:

  • You must itemize.
  • These deductions are only for dollars you pay out-of-pocket.
  • The deductions can be claimed when they are more than 7.5% of your Adjusted Gross Income (AGI).  (For example, if your AGI is $40,000 you could potentially deduct any expenses over $3,000.)
  • You need to keep records.

Even though it involves a little upfront planning, it makes sense to look at these deductions. If you didn’t do it in previous years, why not start RIGHT NOW?

Health care costs keep rising.  Considering this medical and dental expenses tax deduction would essentially lowers your taxable income.

Speak with your tax advisor, but in general there may be deductions for:

Out-of-pocket charges paid to medical practitioners
This includes your family doctor, dermatologists, ophthalmologists, psychiatrists, dentists, acupuncturists and chiropractors to name a few.

Surgery
Any authorized operations – including Lasik surgery – are usually deductible.

“Unnecessary cosmetic surgery” is not deductible according to IRS Publication 502.  However, there are exceptions for some cosmetic surgery. Speak to your tax advisor for detailed information if this may apply. Also, talk to your tax advisor about what’s allowed if you know you may need surgery this year.

Don’t have a tax advisor? For City of Boston residents, there may be FREE tax preparation assistance available to you! To find a tax assistance location near you, call the Mayor’s Health Line at 617-534-5050 or go here: http://www.bostontaxhelp.org/

Medications
Any medicines prescribed by a doctor are usually deductible.  Over-the-counter remedies like aspirin or vitamins are not deductible, even if they’re recommended by a medical practitioner.

Medical aids
Eyeglasses and contact lenses are usually deductible including the cost of eye exams. In some cases, saline solutions and cleansers to maintain your contacts can be deducted, as well.  Hearing aids and batteries also fall under this category.

Medical insurance
Health insurance or COBRA premiums and Long-Term Care insurance paid with after-tax dollars are typically deductible.

Transportation
Whether you use public transportation or drive your own car to get yourself, a spouse or a child to the doctor, you may be able to earn deductions on fares, mileage and any parking or tolls you pay.

Equipment or improvements to your home needed for medical care
Modifications to a dwelling made to accommodate a disabled family member – like adding a ramp or widening an entry – may be deductible.

That’s only a sample.  Read the complete IRS list here.

IRS Incentives for Your Other New Year’s Resolutions

Stop Smoking
A smoking habit costs you in terms of your health and your wallet.

Participating in a qualified smoking cessation program, like “Make Smoking History” in MA, might allow you to deduct these costs.  You can also deduct the cost of medicine your doctor may prescribe for nicotine withdrawal.  Smoking cessation products purchased over the counter are typically not deductible.

Lose Weight
Some of us can successfully control our weight with diet and exercise.  Getting started and following a simple diet plan is usually enough to reach our goals.

But, if your doctor prescribes a weight-loss program to help you battle a medical condition like obesity, hypertension, or heart disease, the expense may be deductible.  If you already belong to a fitness club or gym, you can deduct separate fees paid for treatment for your specific condition.

Smile More
Do you know the importance of good dental health?   Schedule an appointment if it’s been awhile since you’ve seen the dentist.  Out-of-pocket dental expenses like exams, x-rays, fillings, braces and dentures are tax-deductible.  Things like cosmetic teeth whitening and the cost of your toothbrush and toothpaste are not. The Mayor’s Health Line may be able to assist with finding low-cost dental care, working in collaboration with the Office of Oral Health.

Other Healthy Ways to Potentially Lower Your Taxes
If you’re not already participating, consider an HSA or FSA when the next enrollment period opens up.  Here’s how these accounts can help save you money on your health expenses.

HSAs
Health Savings Account (HSA) allows you to use pre-tax dollars that can grow tax-deferred if eligible.  An HSA lets you use this money tax-free when you pay for qualified medical expenses.

FSAs
Flexible Spending Account (FSA) allows you to set aside pre-tax dollars to cover certain healthcare and dependent care expenses if your employer offers this benefit.  Be advised that you have to use your FSA dollars by the end of the calendar year, or you lose them.

Take a Tax Break
The IRS allows for a wide range of conventional medical treatments as well as alternative forms of care.  Review the expenses you paid in 2009 and estimate your deduction.  If it seems large enough, speak with your tax advisor about taking full advantage of it.

If you can’t take advantage of these breaks for this tax year, keep them in mind for 2010 when you’re doing your future tax planning.

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