Tax Time - Medical Deductions for Dependents
By Kelly Greene
Staff Reporter of THE
WALL STREET
JOURNAL
Yes, you really can get a tax break for some medical expenses that
you pay on your parents' or adult children's behalf, even if you can't
claim them otherwise as dependents.
A column a few weeks ago that mentioned this deduction sparked a slew
of follow-up questions from readers. The top one: Where exactly does the
Internal Revenue Services spell out this write-off?
The answer: IRS Publication 17, chapter 23, page 147, under the
heading: "Whose Medical Expenses Can You Include?" You can
find it at the address: http://www.irs.gov/pub/irs-pdf/p17.pdf
on the Web.
To sum up, you generally can count an individual as your dependent
for the purposes of the medical-expense deduction if all of the
following requirements are met:
-
He or she is your relative or has lived with you for the entire
year.
-
He or she is a U.S. citizen or resident.
-
You provided more than half of the person's total support for the
calendar year.
There's a long list of family relationships considered kin: son and
daughter, grandchild, stepchild and adopted child; sibling, including
brother and sister by half blood, stepbrother and stepsister; mother,
father and ancestor of either; stepfather and stepmother; niece and
nephew; aunt and uncle; and in-laws.
There are two other requirements that you normally would have to meet
to count someone as your dependent: He or she can't file a joint tax
return or have $3,000 or more in gross income. But those tests don't
count against your qualifying someone as a "medical
dependent," says Jeffrey Kelson, a partner in BDO Seidman LLP's
tax-services practices in New York.
The IRS publication specifically says that "you can include the
medical expenses of any person who is your dependent even if you cannot
claim an exemption for him or her on your return." Just make sure
that you've provided more than half that person's income.
Once you meet the support threshold, you can combine your
"medical dependent's" health-care bills with your own and
deduct any amount over 7.5% of your adjusted gross income.
You can include nursing-home costs in those bills if you, your spouse
or your dependent, as defined above, is confined for medical treatment.
But there's a catch: Medical care has to be the principal reason for the
person's nursing-home stay, in which case you can deduct the entire cost
of care, including meals and lodging. If the person's stay is mainly due
to personal or family reasons, only the part of the cost attributable to
medical or nursing care -- excluding meals and lodging -- is deductible.
Remember, too, that if you or your medical dependent has a
"tax-qualified" policy for long-term care insurance, the
premiums for that policy or policies may be included as deductible
medical expenses.
One reader asked whether she can deduct the rent for her mother's
assisted-living apartment as a medical expense, since she's disabled.
Mr. Kelson says that the U.S. Tax Court has ruled that a taxpayer could
deduct rent for his elderly mother's apartment because it was "no
less a medical expense than the cost of a hospital room."
Other people, it turns out, are picking up medical bills for their
adult children. Those, too, are deductible, so long as you're providing
at least half of your child's financial support.
To avoid winding up in that boat, though, it pays to "have a
good, frank talk with your children about their financial situation in
the areas that could affect you," says Michelle Hoesly, a Norfolk,
Va., retirement planner. She suggests asking your children whether they
are carrying adequate life and hospitalization insurance. If not, she
suggests asking, "Do you know what effect it could have on
me?"
Encore is the Journal's guide to retirement. E-mail: encore@wsj.com
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