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Trim tax through weight loss program

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Michelle Pena

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in Small Business Tax,Small Business Tax Deduction Strategies

Usually, you can’t claim medical expense deductions for costs that simply improve your overall health or general well-being.

Strategy: Document expenses of a weight loss program. If the program is prescribed by a physician to combat a specific illness or disease like obesity, the cost qualifies for the deduction.

However, the costs must be properly substantiated. (Fiedziuszko, TC Memo 2018-75, 5/31/18)

Here’s the whole story: Under current tax rules, you can deduct unreimbursed medical and dental expenses exceeding 7.5% of your adjusted gross income (AGI). Previously, the threshold was 10% of AGI, but the Tax Cuts and Jobs Act temporarily lowered to this figure, for 2017 and 2018. Thus, you may finally clear the threshold this year.

For instance, if you have an annual $100,000 AGI and you have $8,000 in unreimbursed medical expenses in 2018, your deduction is limited to $500. Furthermore, a medical deduction can only be claimed by taxpayers who itemize deductions on Schedule A.

For these purposes, qualified expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body. This includes health insurance premiums, prescription drugs and transportation to and from medical treatment, just to name a few common examples.

New case: A woman, a resident of California, was diagnosed with morbid obesity. Her husband was also considered obese and displayed pre-diabetic indications. The couple was advised by their doctor to enter a medically supervised weight loss program.

They entered into a local program supervised by a health educator. On their tax return for the year in question, they deducted more than $16,000 in medical expenses for the weight loss program for the two of them.

Because the IRS considers obesity to be a disease, amounts paid for participation in a weight loss program treating obesity are considered to be expenses for medical care. Therefore, the expenses for the program qualify for a medical deduction.

However, the couple only produced a general informational printout from the program’s website without any other evidence of their expenses. Result: Deduction denied.

Tip: The threshold for deducting medical expenses reverts to 10% of AGI in 2019.

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