Business Expense Vs. Medical Expense
Another way around the 7.5% limitation is when expenses can be reclassified as something else. Some expenses are deductible as business expenses rather than medical expenses. Claiming a business deduction is not subject to the 7.5% limitation. If you are disabled and have expenses which are necessary for you to be able to work (impairment-related work expenses), you can take a business deduction for these expenses, rather than a medical deduction. You are disabled if you have either:
You can deduct impairment-related expenses as business expenses if they are:
Nondeductible Expenses
Many expenses, although seemingly related to arthritis health care, are specifically not deductible. One example is the cost of over-the-counter medicines (even if you have a doctor's prescription). Over-the-counter drugs such as:
However, some over-the-counter and non-prescription products are still fully deductible.
In addition, medically prescribed marijuana, which is now also commonly called "medical marijuana", has also been ruled nondeductible.
Essential Recordkeeping and Documentation
When deducting these medical expenses they should be properly documented with receipts. You should have a written recommendation from your doctor expressing the medical need. Any expense deemed personal rather than medical is not deductible. This should not discourage you from deducting legitimate medical expenses. Tax laws are complex and ever-changing.
The IRS does scrutinize large medical deductions so be sure to obtain expert tax advice. A doctor's recommendation does not guarantee IRS approval. The IRS can and does dispute the medical necessity of expenses even if a doctor's recommendation is provided as backup.
This article is not a substitute for professional accounting services. Please consult a competent tax professional for answers to your specific questions.
By Richard Eustice, a former tax professional for over 15 years, retired early due to disability from rheumatoid arthritis.
Related Resources - Medical Expenses / Income Taxes
Related Resources - Arthritis And Income Taxes
Sources: Your Income Tax, by J.K.Lasser; Tax Liberty, by Robert C. Carlson, J.D., C.P.A.; The Book of Tax Knowledge, Boardroom Classics; Write-Offs, Arthritis Today magazine Nov/Dec96
