How to write off medical expenses
Last year, Julia and Steven Greenwell spent more than $10,000 remodeling a bathroom. This year, at tax time, they'll get some of it back. Many of their construction costs are deductible -- as medical expenses.
The Greenwells didn't have the work done simply to update their Northern California ranch-style house. They needed to make it more accommodating for their 8-year-old daughter, who has cerebral palsy. Now their daughter's shower is wheelchair accessible. They added ramps and railings throughout the house too.
"The cost of doing this stuff is more expensive than you'd ever imagine," Steven Greenwell said. "I wouldn't advocate doing anything just for the tax breaks. But they help soften the blow."
Millions of taxpayers qualify for unconventional breaks by virtue of ailments or disabilities that turn the cost of normally nondeductible items into write-offs. But these are often overlooked.
"At least 20% to 30% of the people we see have no idea what tax benefits they are entitled to," said Bernard A. Krooks, founding partner of the New York law firm of Littman Krooks. "A lot of the time, people dealing with a disability are so overwhelmed with everything they have to do that taking a tax deduction is not even on their list. They don't even think to mention this stuff when they go to the accountant."
Deductible medical expenses include payments to diagnose, cure, treat or prevent disease. They are deductible to the extent that they exceed 7.5% of adjusted gross income, or, if the taxpayer is subject to the alternative minimum tax, 10% of AGI, said Stephen Dale, a Walnut Creek attorney and member of the Special Needs Alliance, a nonprofit group made up of attorneys specializing in disability law.
So, if you have $50,000 in adjusted gross income, your medical expenses can be deducted if they are more than $3,750 or $5,000, respectively.
That makes medical expense write-offs relatively rare for people with fairly standard expenses, such as prescriptions and co-payments, except in unusual years when these individuals might be paying for a one-time event such as laser eye surgery, orthodontia or a fertility treatment, for example.
For people with chronic ailments, the cost of healthcare can be so high that the threshold is easy to clear. And in many cases, expenses that taxpayers wouldn't necessarily think to write off are valid.
