It’s that time of year again: March and April mean it’s time to square up with the federal government and, depending on where you live, with your state and city, too. Since treatment for substance abuse or another mental health issue can easily leave you or a loved one with a hefty bill even after insurance chips in, you may be wondering if any portion of your uncovered expenses might be written off your tax returns, which are due by Wednesday, April 15, 2015.
First off, the good news: “Substance abuse treatment is deductible,” confirms Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block in Kansas City, Missouri. “Expenses for a medical reason can be deducted” as long as you itemize your deductions on your tax return. If you are itemizing, professional treatment for drug addiction (which includes addiction to alcohol, nicotine and other substances), food disorders and for weight loss can all be written off. You can also deduct lodging and meals (for the patient only, not any loved ones), medication, psychotherapy, some non-traditional medical therapies (including acupuncture) and many other therapies used to help you or a loved one get well while staying at an inpatient treatment facility for these issues.
How to Handle Uncovered Expenses
There are some IRS rules, though, that do require a bit of math, so get your calculator ready. For example, you can deduct treatment expenses that aren’t covered by health insurance when they exceed 10% of your adjusted gross income. So that means if your adjusted gross income was $50,000 in 2014, you could deduct any uncovered medical expenses that exceeded 10% of what you earned (so anything over $5,000). If, say, you spent $6000 out-of-pocket in this scenario, you could claim the additional $1000 (the amount over 10% of your adjusted income) as a deduction on your 2014 tax return. Medical expenses that total less than 10% of your adjusted gross income cannot be written off. And if you paid for uncovered medical expenses with a health savings account (HSA), those expenses cannot be written off your taxes either (no double-dipping allowed).
If the person who was treated for addiction wasn’t you, it’s important to know that you may not be able to deduct medical treatment expenses for everyone you claim on your return. You can write off qualifying addiction treatment costs that aren’t covered by medical insurance for yourself, a spouse or a dependent child or qualifying dependent relative, like a sibling or parent who is a U.S. citizen and lived with you throughout 2014. Says Perlman, “You can deduct the expenses for an adult who would be your dependent, except if the person had gross income over $3,950 in 2014, so long as you still provided more than half of the person’s support.”
Other Expenses You May Be Able to Claim
Don’t forget, too, that medical mileage is deductible, at 23.5 cents per mile for 2014, plus tolls and parking, Perlman says. This amount can add up quickly if the rehab center or other facility is a distance from your home.
A tax professional can also advise you if any costs for intervention services – which can run from $1,500 to $10,000 – to educate, mitigate and transport a patient into addiction treatment could be deducted on your income taxes. And if you forgot to write off substance abuse or eating disorder treatment in a previous tax year, rest assured that you can amend up to three years of already-filed itemized tax returns, Perlman says. See a tax professional to discuss your situation and to see if you qualify.
Things will proceed more smoothly if you’re able to organize the paperwork before you arrive at your appointment: Bring along copies of your bills and any receipts for treatment, medication, counseling sessions, co-pays and any other expenses you’re wondering about. This will enable your tax preparer or accountant to easily calculate write-offs and help you file your return by April 15th or file an extension if you need one.