Tax relief for medical expenses
Tax relief for medical expenses

IRS Puts a Stop to Doctor's Medical Deductions


Much of the terminology the IRS uses is subject to at least some interpretation, and the term "medical deduction" is certainly among them. However, taxpayers should not forget there are limits to the government agency's patience, and some things, like excessive spending in the name of reducing anxiety, will not be permitted to be written off on one's taxes.

Dec 3rd 2020
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Usually, the IRS doesn’t dispute taxpayers’ medical expense deductions if they’re able to prove that the expenses are doctor-ordered. But some taxpayers have learned the expensive way that doctors’ recommendations aren’t automatic guarantees that their write-offs will pass muster.

Take, for example, a dispute that pitted the feds against Frank Rabb, himself a doctor, and his wife, Betty, whose laundry list of medical problems included chronic anxiety neurosis and phobias of sudden death, heights, cars, and being alone.

Frank had Betty examined by two psychiatrists. Their diagnosis: Betty could be socially integrated and deterred from threatening to kill herself, her children, and Frank if she had certain possessions. Their recommended treatment (“milieu therapy” in medical jargon) called for, among other things, providing “a social environment without anxiety.”

So, during the year in issue, Frank footed bodacious bills for such big-buck items as specially tailored clothing, unlimited department store charge accounts, boat trips, new furniture and appliances, the remodeling of a lake cottage, and improvements to a new apartment. Those outlays, the physician figured, entitled him to trim the tax tab with a medical write-off for the entire cost.

Predictably, the IRS disallowed the entire deduction. Frank then tried to convince the Tax Court. But his contention that charge accounts were an essential part of Betty’s therapy got exactly nowhere with the court, though it readily conceded that shopping with unlimited charge accounts is generally therapeutic for a housewife, especially one under treatment for an anxiety neurosis.

Moreover, his case wasn’t helped when the two psychiatrists gave conflicting testimony. While one remembered having recommended shopping excursions to strengthen Betty’s “tenuous hold on reality,” the other testified that Frank was forced to go along with the purchases to prevent his wife from being provoked into violent anger.

Although the court acknowledged that Betty’s shopping sprees might generally have alleviated her problems, it sided with the IRS. It zeroed in on Frank’s failure to directly tie the purchases to Betty’s treatment. Nor was he able to prove that he wouldn’t have spent as much without the recommendation of a psychiatrist.

Question: Am I allowed to deduct the cost of deprogramming a family member who joined a religious cult?

Answer: Not according to an IRS ruling that disallowed a deduction for what a mother paid to deprogram her teenager.

Question: My spouse and I are adoptive parents. Are we entitled to deduct expenses of the natural mother in giving birth?

Answer: No. The IRS allows the deduction only for medical costs attributable to the child’s care, not those incurred to protect the mother’s health.

The next question evokes the observation by a Tax Court judge that “hope springs eternal in the heart of the American taxpayer.”

Question: My two adorable rottweilers rely on me for food and shelter. I rely on them to make my home safe. I consider both to be part of the family.

The way I read the rules for allowable medical-expense deductions is that they include payments to veterinarians. While we’re at it, let’s not forget medical write-offs for travel expenses incurred when I take the dogs on lengthy trips to vets. What’s your take on whether the IRS reads the rules the way I do?

Answer: While I’m not a gambling man, I’m willing to bet the family farm that it reads them differently. Ditto for the Tax Court.

Consider how badly things turned out for dog owner Leland Schoen, who made a similar argument in the Tax Court. “In no circumstances can man’s best friend qualify as a dependent by blood, marriage, or adoption,” said the court, which ruled that Leland couldn’t deduct his dog’s medical expenses.

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 350 and counting). 

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