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Medical deduction denied

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in Small Business Tax,Small Business Tax Deduction Strategies

It’s difficult to clear the hurdle for deducting medical expenses. For 2017, current law says you can only deduct qualified expenses in excess of 10% of your adjusted gross income. So it’s important to make sure that every deductible expense count.

To qualify, expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. This includes payments for medical services rendered by physicians, surgeons, dentists and other medical practitioners. And you can add on the costs of equipment, supplies and diagnostic devices needed for these purposes.

But medical expenses must be incurred primarily to alleviate or prevent a physical or mental defect or illness. They don’t include costs that are simply beneficial to your general health, such as vitamins or a relaxing vacation. Certain expenses that fall into a “gray area” may be contested in the courts.

New case: The taxpayer and his same-sex partner wanted to try to have children through in vitro fertilization (IVF). The IVF process involved collecting the taxpayer’s sperm, using it to fertilize eggs donated by a woman and then implanting the embryos into the uterus of another woman who served as a gestational surrogate.

For a period spanning 2010 to 2014, the taxpayer paid more than $100,000 in expenses relating to seven IVF procedures, three egg donors, three surrogates and two fertility specialists. He paid almost $57,000 out-of-pocket for IVF-related expenses in 2011 alone.

This included $1,500 for procedures performed directly on his body such as blood tests and sperm collection. The remaining amount was incurred to identify and retain the women who served as the egg donor and the gestational surrogate, compensate the women for their services, reimburse travel and other expenses and provide medical care for the women.

Now the Tenth Circuit Court has denied a deduction for all the IVF-related expenses except for the $1,500 directly relating to the taxpayer’s body. The other costs don’t qualify as deductible medical care. (Morrissey, CA-11, 9/25/17)

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