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3 ways to clear the medical deduction hurdle

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in Small Business Tax

It’s tough to qualify for a medical-expense deduction, but it’s not impossible. The law says you can deduct any unreimbursed medical and dental expenses that exceed 7.5 percent of your adjusted gross income (AGI).

But don’t give up so quickly. You may be able to squeeze out a deduction this year if you incur some out-of-the ordinary costs. Here are three ways to jump the hurdle in 2006:

1. Write off someone else’s expenses. Normally, you can claim a dependency exemption for relatives only if you provide more than half of their support and their income was less than the personal exemption amount ($3,300 for 2006). But you don’t have to meet the income test to deduct the person’s medical expenses.

In other words, you can add the medical payments paid for a relative to your personal amount, even though he or she isn’t technically your dependent.

2. Install home improvements for medical reasons. Deductible medical expenses must be incurred for the prevention or alleviation of a physical or mental defect or illness. For that reason, you can deduct a portion of a home improvement that is medically necessary. This includes items such as a swimming pool used by an arthritis patient or air conditioning to alleviate a family member ’s asthma. The amount you can deduct is equal to the cost above the resulting increase in the home’s value.

3. Seek the best possible health care around. The IRS says you can deduct the cost of your travel expenses (including lodging of up to $50 per night) to obtain medical care. And there’s no requirement that you have to use the closest available doctor. For instance, if you fly to the Mayo Clinic to receive treatment, you can deduct your airfare and related expenses for the trip. That deduction includes the costs attributable to someone accompanying the patient.

Tip: In lieu of tracking your actual automobile expenses, you can deduct a flat 22 cents per mile for medical travel in 2006, plus related tolls and parking fees.

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