A recent Tax Court case shows how your clients can write off the cost of a weight loss program if it’s prescribed by a physician to combat a specific illness or disease.
It makes sense to stay in shape and watch your diet, but the IRS generally doesn’t allow medical deductions for expenses that improve your general overall health, such as membership to a gym or nutritious foods. However, as shown in a new case, Fiedziuszko, TC Memo 2018-75, 5/31/18, there are exceptions.
Currently, under the Tax Cuts and Jobs Act (TCJA), the threshold for deducting medical expenses is 7.5 percent of your adjusted gross income, lowered from 10 percent of AGI. The excess is deductible by itemizers. However, the TCJA returns the threshold to the 10 percent-of-AGI mark after 2018.
To qualify as a deductible expense, the cost must be incurred for medical care. Any reimbursement is subtracted from the deductible cost. For this purpose, “medical care” includes (but isn’t limited to) amounts paid for the following:
- The diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body
- Transportation primarily for and essential to medical care
- Prescription drugs
- Qualified long-term care services
- Health and medical insurance
In addition, payments to participate in a weight-loss program for a specific disease or diseases diagnosed by a physician, including obesity, qualify for the deduction, but not ordinary payments for diet food items or health club dues.
The new case involved a married couple residing in California. The wife was diagnosed with morbid obesity in 2011. Her husband was also considered obese and displayed pre-diabetic indications. They were counseled by their doctor to enter a medically-supervised weight loss program.
The couple chose a program designed by Health Management Resources (HMR) and administered through the Palo Alto Medical Foundation. A health educator supervised the program.
On their 2012 return, the taxpayers deducted $16,322 in medical expenses for the cost of the HMR program. The record includes a printout from Palo Alto Medical Foundation’s website that provides information about its weight loss services.
Also, a statement prepared by the husband for trial listed the dates and amounts of payments for the HMR program. The statement separated the HMR expenditures attributable to the spouses by check numbers.
Because the IRS considers obesity to be a disease, uncompensated amounts paid for participation in a weight loss program as treatment for obesity are considered to be expenses for medical care. The couple was directed by their physician to enter a medically=supervised weight loss program. Therefore, the expenses of the HMR program qualify for a medical deduction.
Unfortunately, however, the Tax Court determined that the couple failed to properly substantiate the cost of their treatments at HMR. The statement of expenses prepared by the husband doesn’t satisfy the requirement for an itemized statement. Nor was there any other corroborating evidence. Accordingly, the deduction is denied.
Inform your clients about these tax rules if they may benefit from the lower 7.5 percent-of-AGI threshold for 2018. Reminder: The threshold reverts to 10 percent of AGI in 2019.
About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.