Medical and Dental Expense Deductions

The Internal Revenue Code (IRC) Section 213 provides taxpayers with guidance on medical and dental expense deductions. This section allows individuals to deduct certain healthcare costs that they have paid out-of-pocket, provided these expenses exceed a specified percentage of their adjusted gross income (AGI). Understanding Section 213 can help taxpayers maximize their deductions and reduce their overall tax liability.

What Are Medical and Dental Expenses?

Medical and dental expenses encompass a wide range of costs incurred for the diagnosis, treatment, or prevention of medical conditions. These expenses can include:

• Payments for medical services provided by healthcare professionals (doctors, dentists, etc.).
• Costs associated with medical procedures and surgeries.
• Payments for prescription medications and certain over-the-counter drugs (under specific conditions).
• Expenses related to long-term care services.
• Transportation costs to and from medical appointments.
• Premiums for health insurance that cover medical care.

Qualifying Medical Care

According to Section 213, the term "medical care" includes expenses for:

1. Diagnosis, Cure, and Treatment: Any costs associated with medical services aimed at diagnosing or treating illnesses or injuries.
2. Preventive Measures: Expenses incurred for preventive care, such as vaccinations or screenings.
3. Long-Term Care: Services that assist individuals who are unable to perform basic daily activities due to chronic illness or disability.
4. Insurance Premiums: Payments made for medical insurance that covers the aforementioned services.

Transportation and Lodging

Section 213 also allows for the deduction of transportation expenses incurred primarily for medical care. This includes costs for traveling to appointments, whether by car, bus, or taxi. However, the travel must be essential to receiving medical care to qualify for this deduction.

In addition, taxpayers may deduct lodging expenses while away from home for medical care. The deduction is limited to $50 per night for each individual and only applies if the lodging is essential to receiving treatment.

Who Can Claim the Deduction?

The deduction for medical and dental expenses is available to taxpayers, their spouses, and dependents as defined by the tax code. A dependent is typically a qualifying child or relative who resides with the taxpayer and meets certain income and support tests.

Adjusted Gross Income Threshold

To take advantage of the medical expense deduction, taxpayers must first calculate their adjusted gross income (AGI). The deduction is limited to the amount of qualified expenses that exceed 7.5% of the taxpayer's AGI. For example:

• If your AGI is $60,000, then 7.5% of that amount is $4,500.
• You can only deduct medical expenses that exceed $4,500. So, if your total medical expenses for the year are $6,000, you would be able to deduct $1,500 ($6,000 - $4,500).

Specific Limitations and Exclusions

While IRC Section 213 provides significant deductions, there are specific limitations and exclusions that taxpayers should be aware of:

Prescription Drugs and Medical Equipment

Only expenses for prescribed medications and certain medical supplies qualify for the deduction. Over-the-counter medications do not qualify unless prescribed by a physician.

Cosmetic Surgery

Expenses related to cosmetic surgery are generally not deductible unless they are necessary to correct a deformity caused by a congenital condition, an accident, or a disease. For example, reconstructive surgery following an injury may qualify, while elective procedures for aesthetic purposes typically do not.

Long-Term Care Insurance

Premiums paid for long-term care insurance can be deducted, but they are subject to specific limits based on the age of the insured. The age-related limits are as follows:

• Individuals aged 40 or younger: up to $200
• Ages 41 to 50: up to $375
• Ages 51 to 60: up to $750
• Ages 61 to 70: up to $2,000
• Ages 71 and older: up to $2,500

These amounts may be adjusted annually for inflation.

Payments to Relatives

Payments made to relatives for medical care are generally not deductible unless certain conditions are met. For example, if a taxpayer pays a family member directly for health services, they must ensure that the payment is for qualified medical care.

Special Considerations for Decedents

Section 213 has specific provisions for individuals who pass away. Medical expenses incurred after a taxpayer's death but paid by their estate within one year can still be claimed as a deduction. However, this is subject to specific rules and limitations outlined in the code.

Practical Examples and Scenarios

Example 1: John’s Medical Expenses

John is a single taxpayer with an AGI of $50,000. During the year, he incurred the following medical expenses:

• Doctor's visits: $2,000
• Prescription medications: $1,500
• Health insurance premiums: $3,000
• Lodging for medical treatment: $600 (12 nights at $50)

Total Medical Expenses: $7,100

Since John’s AGI is $50,000, he calculates the threshold:

7.5% of $50,000 = $3,750

Now, he subtracts the threshold from his total medical expenses:

$7,100 - $3,750 = $3,350

John can claim a deduction of $3,350 on his tax return.

Example 2: Sarah and Cosmetic Surgery

Sarah has an AGI of $80,000. She underwent elective cosmetic surgery for aesthetic reasons, costing $10,000. Unfortunately, because her surgery was not deemed medically necessary, she cannot deduct any of this expense from her taxes.

Example 3: Long-Term Care Premiums

Michael, who is 72, pays $3,000 in long-term care insurance premiums. According to Section 213, he can deduct up to $2,500 for these premiums due to his age. Therefore, he can claim a deduction of $2,500 on his tax return.

Record Keeping and Documentation

To substantiate medical and dental expense deductions, it is crucial for taxpayers to maintain thorough documentation. This includes:

• Receipts for all medical expenses.
• Prescription records for deductible medications.
• Statements from insurance companies showing premiums paid.
• Records of transportation and lodging expenses related to medical care.

Keeping accurate records will help ensure that taxpayers can validate their deductions if questioned by the IRS.

Conclusion

IRC Section 213 offers valuable opportunities for taxpayers to reduce their taxable income through medical and dental expense deductions. By understanding what expenses qualify, the limitations imposed, and the necessary calculations, taxpayers can effectively navigate this section of the tax code. It is also beneficial to consult with a tax professional to ensure all eligible deductions are claimed and that all relevant documentation is maintained. This way, taxpayers can maximize their deductions while complying with the law.