Your allowable deductions for medical expenses include a good deal more than just those obvious payments to physicians and hospitals.
For instance, you’re entitled to a medical deduction for the salary paid for home nursing care of one of your dependents or yourself. This holds true even if the person you hire has no previous nursing experience at all. What counts is the type of work they actually perform.
The paperwork can get complicated when you hire someone who doubles as a nurse and a housekeeper. Revenue Rule 76-106 requires you to make an apportionment between the time he or she spends on nursing care, such as changing dressings or bathing a patient, and the time spent on nonmedical duties, such as cleaning, cooking or caring for healthy children.
The law allows you to take a medical deduction only for payments (including the amounts you pay as an employer for Social Security taxes) that are allocable to nursing care. Forget about any write-off for payments that are allocable to household chores.
While you’re entitled to a deduction for the amount you spend on the nurse’s meals, you have to apportion the cost in the same way as wages. If only half of your helper’s time is spent nursing, then only half of the meals are deductible.
Stricter rules apply when it comes to a deduction for the lodgings you furnish. To reap a deduction, you have to show you made out-of-pocket expenditures directly attributable to the nurse that were greater than your normal household expenses—say, rent for an extra bedroom or money spent on additional utilities.
Keep in mind the IRS requires the allocation to be made strictly on the basis of the amount of time spent on medical care. It doesn’t take into account the possibility that the going rate for medical services is higher than for household ones. Since the agency may indulge in some second-guessing on how much is deductible, keep a simple diary that breaks down on a daily basis what type of work was done.
Here’s a reminder on a write-off that’s frequently overlooked: Claim a medical insurance deduction for part of your child’s college fee for education, board and the like, provided it includes a separately stated charge for health care items, such as counseling for emotional problems. If the charge isn’t separately itemized, ask the school for a breakdown of your bill in case the IRS later questions your return.
Additional articles. A reminder for accountants who would welcome advice on how to alert clients to tactics that trim taxes for this year and even give a head start for next year: Delve into the archive of my articles (more than 275 and counting).
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.