Medical Expense Deductions

0:00 Ralph: Have you ever wondered if that expensive prescription or medical procedure can be written off on your taxes? Well, today we're separating medical myth from fact. And we're going to share what expenses the IRS actually allows you to deduct. You don't want to miss this one.

0:44 Welcome back to the show. on this, personal finance Friday. I'm excited to dive in today's topic with you. It's fertilizer season here in Delaware, and we use it all for fertilizer and I mean all in this state, and since we have a huge chicken raising business, You can only imagine where all that waste goes. Needless to say, it's a pungent morning here on the farm. So I thought I'd start off with that. On today's show, we're tackling a topic that impacts all of our lives and that's medical expenses. You know, as I get older, I see this as being more and more of an issue. And I want to start by thanking a longtime client for asking about today's topic. She also wanted to remind our listeners. About the annual IRS publication , number 502. That's where they highlight what's new each year in the tax code.

1:26 It's really a great resource. And again, I want to thank this client for pointing that out to us and asking today's question. So at some point or another, we're all going to incur medical costs. Whether it's for routine checkups. Unexpected illnesses or injuries or planned medical procedures. We're all going to face that. And when these bills start rolling in, wouldn't it be nice to know some of those expensive costs can be deducted on your tax return. Well today, we're going to explore just that. We're going to talk about which medical expenses the IRS actually allows you to write off and which ones you won't be able to do it. And you know which ones don't make the cut. As you'll see the rules can be quite complex. So listen up as we separate medical myth from fact.

2:09 My goal today is by the end of today's episode, you'll have the clarity on what medical receipts to set aside for tax time. Now, before we dive in, don't forget to subscribe to the show and join our email list. You can do that at askralphpodcast.com because you don't want to miss tomorrow show tomorrow. We're going to talk about reverse mortgages and just what they are. The potential pros and cons of those. So it has an episode you don't want to miss. Well, let's start with the basics today. The IRS allows you to deduct legitimate medical care expenses for yourself. For your spouse and your dependent. Now here's the key folks. These expenses must meet three key IRS criteria. Now, what are they?

2:49 Well, we're going to talk about that right now. They must be primarily to alleviate or prevent a physical or mental defect or illness. I guess I'm in trouble already. Anyway, just being funny. This includes dental and vision expenses. So they must be primarily to alleviate or prevent a physical or mental defect or illness. And like I said, this includes dental and vision expenses, as well as, you know, routine medical. They can't be for general health purposes, for example. And this is one of the questions my client was asking directly. Vitamin supplements or gym memberships don't count. The care must be targeting a specific medical condition. So overall general health. Isn't going to work for this.

3:30 There are also some limitations depending upon your age. And they expand as must exceed seven and a half percent of your adjusted gross income. If your medical bills, don't meet this threshold. You unfortunately can't take the deduction. So now we've covered the core criteria. Let's dive into some common examples of deductible and unfortunately non-deductible healthcare costs. Let's start with a deductible ones. Doctor visits, copays and prescription medication used to treat an existing medical condition. are deductible. So you want to make sure you keep track of those copays. You want to keep track of those RX receipts, keep track of all that stuff. Another thing that is deductible is necessary equipment that will be things that crutches wheelchairs.

4:10 and, insulin monitors. I happen to be a type two diabetic, so my insulin supplies are covered. As long as they're prescribed by a medical professional, these things can be deducted. In addition to that. And this is something a lot of my clients aren't aware of. Transportation for medical care, such as ambulance fees or mileage to drive to medical appointments count as well. So you want to keep a mileage log, especially as you get older. Keep track of all those doctor visits. If you're going to see a specialist, I have some clients that have told me. They have to go out of state or to another area to see a particular specialist, all that travel cost, all that mileage is deductible. In addition to that medical procedures like surgeries. Dental work like crowns or braces or vision correction surgery, all qualify as a medical deduction.

4:57 In addition to that chiropractic care and acupuncture have also been rolled as deductible. If they're treating a diagnosed medical issue. And here's what a lot of people aren't aware of. Special schooling for physically or mentally disabled children can potentially be deducted as well. So now we've covered the things that are deductible. Let's explore some expenses that you might think are deductible. Actually won't pass the IRS test. So here are some nondeductible things, gym memberships. We talked about this a little bit. They're not deductible. Even if your doctor recommends exercise for a health condition. And even if you go and see your doctor for your annual physical, I think I got mine coming up pretty soon. For my general wellbeing, the doctor could recommend exercise now in my particular case.

5:40 Since I am a type two diabetic. This exercise probably would qualify as a medical deduction. I don't want to confuse everybody, but in general, The gym is not deductible as an expense. Similarly, as we talked about Vitamins and supplements taken for overall health. Don't qualify and that's a big disappoint for a lot of people. I think I kind of disagree with that, but unfortunately we had to play within the rules. So they must be prescribed by a doctor to treat a diagnosed condition. Now what you can do, and I've actually done this myself. If you want to, you can have your doctor prescribe vitamins and supplements, and then they would be deductible. Now, another thing you cannot deduct. Is teeth whitening.

6:21 Which is really a big disappointment. I thought those crest white strips would be deductible. And other cosmetic dental procedures don't count because they are not medically necessary. that really keys in on the key things, folks. And that is. These things need to be medically necessary. Let's move on. Massage therapy is generally not deductible unless recommended by a doctor to treat a specific injury or condition again. You hear what I'm saying? Folks? Unless a doctor recommends it to treat a specific injury or condition. So if you have one of those chronic conditions, Let's say, for example, you have some sort of lower back pain sciatica as an example, that I went through a bout of that about two years ago and my doctor actually recommended massage therapy.

7:03 So I was able to write those expenses off. In addition to that nonprescription drugs, like pain relievers, allergy medication, and antacids don't qualify, they must be prescribed again. So here's something my wife and I did. Sometimes we have some aches and pains as we get older. So one of the things we did was he had our doctor write us a prescription for Neproxin. Now I'm not a physician, I'm not giving you any medical advice, but because it went through the doctor's office. And came in as a prescription. Those things are deductible. Okay. What else? Isn't deductible weight loss programs are not deductible. Even if you have a diagnosed condition like obesity or diabetes in general. Health improvements are not deductible by the IRS.

7:45 So as you can see. The key is proving the expense is to treat a specific diagnosed medical issue And not for general health and wellbeing. When in doubt and I can't stress this enough, get a note from your doctor to justify the expense. Now let's talk about some actionable steps. So when it comes to tax time, you need to follow these steps to maximize your medical expense deductions. And I can't stress this enough. I say this to clients every day in my practice. Comb through your years, medical receipts and bills to identify expenses that meet the IRS criteria we discussed today. Set those aside in a designated folder or box, I have some clients that actually use a specific credit card or debit card.

8:26 To keep track of all their medical expenses. Listen, folks, the truth is this. As our population ages, a lot of my clients tend to be a little bit older. That is the main area of their expenses. So it's something they really key in on. The next step, calculate the total of these qualified expenses and only claim the ones that exceed your adjusted gross income percentage. And that's where you're going to enlist somebody like myself to help you navigate that. And here's another. Ultimate thing you need to do. And you need to get supporting documentation from your healthcare providers. If you think an expense might raise IRS scrutiny. You want to keep prescription info? Treatment plans and doctor's notes. I'll give you a great example of this. My mother-in-law unfortunately is suffering from dementia.

9:08 So last year, the doctor recommended she go into full time. assisted living. So those assisted living expenses because they are prescribed by the doctor because my mother-in-law is unfortunately unable to care for herself. All of those expenses are considered valid medical expenses, but like I told my wife and my sister-in-law. The key is going to be keep track of all of those things. So every month when you make those payments and they're not cheap folks, If you have anybody that's involved in long-term care or assisted living, those things can get expensive. So keep track of all those expenses, because in this particular situation, because of the costs, my mother-in-law generally has no taxable income because she's able to write off all of her expenses against that income.

9:53 Now if you claim medical mileage. For drives to appointment, you've got to keep it up. Mileage log for that, keep a careful log with date, mileage, and the medical purposes. And then you need to make sure these expenses are for you. As we talked about there for you, your spouse or a legal dependent. And then what you want to do is make sure you submit those sorta medical expenses with your tax return forms. And that's where I'm going to say this, consider having a tax professional like myself, double-check your work, or actually prepare your tax return. The key is to stay organized with this medical paperwork? And stay educated on IRS rules. That's why I love this particular client. She's been a client for many years. She studies the tax code she still comes in and has me do her tax returns.

10:34 Well, let me tell you. She asked some of the best questions of any of my clients. And she reads that publication that we talked about. She understands the things that are changing. You don't have to be a rocket scientist to do it, but you have to be informed. That's the key. The key to maximizing these deductions and saving hundreds, even thousands of dollars each year is to be informed. So before we wrap up, I want to remind all of our listeners to visit our podcast page. That's at askralphpodcast.com. There I'm going to encourage you to join our email list. Well, Ralph, why do you want to do that? Well, I'm gonna tell you why right now, every week, and this is amazing guys. We're giving away a $25 Amazon gift card. So we're going to go through every week.

11:14 We're going to pick somebody at random. Who's a member of our distribution list and going to send them a $25 Amazon gift card. Well guess what? If you're not on the list, you can't win now. Why do you want to be on the list? Well, you want to be on the list because we're sending out information about our episodes. News things like that. So don't forget to join up there on our website. And it also, if you want to schedule a consultation with me, you can do that right there. for example, let's say you've got some questions about your tax return. Or you've got some general questions about your finances. You can go right to our website. That's at askralphpodcast.com/store. And you can actually schedule a one-on-one meeting with me. It doesn't matter where in the world you're located. You know, the zoom platform has opened up this for.

11:57 People to meet with me all over the world. And I meet with clients all over the world, and it's really cool to meet people from different cultures and different parts of the country. So to recap. Let's talk about what we've explored today. We've discussed how you can deduct legitimate medical expenses for yourself, your spouse and dependents. Those that exceed, you know, that threshold, but not all medical costs. Qualify. They must target a specific diagnosed condition, not general health. And we separate medical myth from fact. By listing expenses that are commonly thought to be deductible, but won't pass IRS scrutiny. Those things like gym memberships, vitamins, weight loss programs, and cosmetic procedures. Oh, and I forgot to mention. I met with a client yesterday.

12:37 And he asked me, Ralph, listen, I have a medical marijuana card. Can I deduct the cost of those marijuana purchases? And unfortunately I checked this again this morning, before I set up to do this recording. The IRS will not allow you to deduct. Medical marijuana, because it's still considered illegal at the federal level. Now some states will allow you to deduct that. I'm not sure how you're going to do that. If the states use the standard schedule, a not to get tax wonky with you. But that's going to be an interesting thing. So I'm going to have to do some more research into that. Maybe we'll do another episode about that medical, marijuana and cannabis. So not to get off topic here, but I just remembered that. So on the flip side cost like prescription medications, Treatments for diagnosed illnesses and medical transportation are deductibles.

13:21 You want to make sure you're keeping track of that. So hopefully now you have some clarity. On what medical receipts to organize for tax time. Remember? Keep thorough records and run unclear expenses by somebody like myself. And a little diligence can save you big on your tax bill. Again, I want to remind you to visit our website at askralphpodcast.com. There's all kinds of episodes out there that you get absolutely free. Listen folks. This is my mission. I want to educate people. I want to help people. And if I can provide you with information to help you be successful financially. Or if I can find ways to save you money on your taxes, like in these medical things, then I feel like I've done my job. So thanks again for joining me today. My prayer is that you feel equipped and empowered.

14:02 To steward your finances in a way that honors God, don't be afraid to claim deductions. You deserve that's your right as a us citizen. But of course you got to operate with integrity and as always stay financially savvy, and God bless you abundantly.