IRS Ruling Permits Pre-Tax Reimbursement For Non-Prescription Drugs
The ruling attempts to address some of the disparity that occurs when previously prescribed drugs become available as over-the-counter medicine. What once was covered by health plans at a reduced fee or co-pay can end up costing the user more when there is no potential for reimbursement.
"Since many prescription drugs have moved to the over-the-counter market, this action... makes paying for them a little bit easier to swallow," said Treasury Secretary John Snow.
While these non-prescription drugs are now eligible for exclusion from income, there is no change in the treatment of non-prescription drugs as a medical expense itemized deduction. Pursuant to Internal Revenue Code Section 213, the amount paid for a medicine or drug is allowed as a medical itemized deduction only if it is a prescribed drug or insulin.
Revenue Ruling 2003-102 also addresses the issue of tax treatment of the cost of dietary supplements that are merely beneficial to the good health of a taxpayer or a taxpayer's spouse or dependent. This expense does not qualify for the pre-tax reimbursement, nor does it qualify as a medical itemized deduction.
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