IRS Clarifies Certain Medical Deductions

The Internal Revenue Service has released two revenue rulings that serve to clarify the definition of certain medical expenses that are allowable as an itemized deduction under Internal Revenue Code section 213.

The IRS allows as itemized deductions certain medical expenses that exceed 7.5% of a taxpayer's adjusted gross income. Section 213 prevents the deduction of nonprescription drugs as well as cosmetic surgery. The two rulings provide explanations of certain deductible items that might fall under these categories.

The IRS does not allow a medical deduction for the cost of cosmetic surgery unless that surgery is necessary to correct a deformity. Revenue Ruling 2003-57 clarifies the definition of deformity and specifically includes breast reconstruction surgery and vision correction surgery as being deductible surgical procedures. The ruling also specifically excludes teeth whitening costs from deductible medical expenses.

By way of explanation, the ruling describes breast reconstruction surgery as surgery that corrects a deformity as in the case of corrective surgery following a mastectomy. Laser eye surgery is categorized with deformity-correcting procedures because the surgery corrects a vision dysfunction. Other vision corrective measures, such as eyeglasses and contact lenses, are already allowed as deductions.

The IRS does not recognize teeth whitening procedures as a treatment for a disease, a correction of a deformity, or a correction of a bodily dysfunction, and thus the cost of such measures is not allowed as a medical deduction.

With regard to deductions for nonprescription drugs, the law states that the cost of medicine and drugs taken for medical care is allowed as an itemized deduction only if a doctor prescribes the medicine or drug. An exception to this rule is insulin, which is allowed as an itemized deduction even though it is acquired without a prescription.

Revenue Ruling 2003-58 explains that even if a physician recommends that a patient take a particular medicine or drug, the cost of that item is not allowed as a deduction if the item is acquired without a prescription. The cost of aspirin is cited as an example of a nondeductible medical expense. The ruling goes on to explain that the cost other non-medicinal items recommended by a doctor may be deducted as itemized medical deductions. Examples include bandages and similar supplies, medical equipment such as crutches, and diagnostic devices such as blood sugar test kits.

Unlike changes in the law that require an effective date, clarifications offer explanations of existing law. Thus the clarification is a retroactive event that provides more thorough detail of law that is already in place. As a result, tax returns from previous years (2000 to 2002 are the open years at present) may be amended to take advantage of the explanations set out in these revenue rulings.

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