If cancer treatment is taking a toll on your budget, the next tax season may bring some relief. Deducting medical expenses takes a bit of organization and planning, but the payoff can be significant.
First, Meet the Minimum
In order to deduct medical expenses at tax time, they must represent a substantial portion, at least 7.5% of it, to be exact, of your income. For example, if your adjusted gross income were $50,000, you'd have to have qualifying medical expenses of at least $3,750.
If you suspect that your expenses may not meet the minimum, think again. Qualifying expenses include more than just hospital bills and prescription copays. As long as they're related to your treatment, even expenses for such things as transportation and home improvement can be deducted. Examples include:
- Premiums paid for health insurance
- Installation of a wheelchair ramp on your porch
- Payments for complementary therapy, such as acupuncture
- Parking fees incurred while at treatment
- A wig purchased because of hair lost during chemotherapy
- Mileage for a car driven to and from treatment (19 cents per mile is the 2008 rate for medical mileage.)
- Plastic surgery that's not related to your illness (Breast reconstruction after a mastectomy qualifies; a purely cosmetic nose job does not)
- Child care while you are at treatment
- Nonmedical household help, such as a maid or housekeeper
- Any expenses reimbursed by a flexible spending account (FSA) or payments in to FSAs
- Nutritional supplements, unless prescribed as part of your condition
And remember, eligible deductions aren't limited to cancer-related medical expenses; you can deduct medical expenses for your spouse, children and other legal dependents. That can be important if your cancer-related expenses fall short of the minimum 7.5% level. Throwing in the kids' emergency room visits and your spouse's eyeglasses could help you reach the threshold.
For the full scoop on what does or does not qualify, see the Internal Revenue Service's "Publication 502, Medical and Dental Expenses."
Next, Get Organized
You'll need good records to account for all your eligible expenses. Start a folder to hold every invoice and receipt associated with your medical care. Consider entering each item on a chart that you can refer to at a glance if you need to.
When tax time comes, you'll need to get a Schedule A, Form 1040. Neither the 1040 alone nor the 1040 EZ can be used to itemize and deduct your medical expenses. Also, get a hard copy of the IRS' "Medical and Dental Expenses," for easy reference as you go through each item.
Finally, Get Help if You Need It
As receipts pile up during the year, it may help to put a responsible family member in charge of the file, so you can concentrate on getting better.
If you're usually a "do-it-yourselfer" at tax time but you're not used to itemizing, this may be the year to hire an accountant. A seasoned pro can help you through the complicated process and make sure you're not missing anything.
"Financial Assistance and Other Resources for People With Cancer." Cancer.gov. 28 Feb. 2008 <http://www.cancer.gov/cancertopics/factsheet/support/financial-assistance>.
"Insurance Issues." Cancer.org. 26 Oct. 2005. American Cancer Society. 11 Aug. 2008 <http://www.cancer.org/docroot/CRI/content/CRI_2_6X_Insurance_Issues_7.asp?sitearea=CRI>.
"Publication 502 (2007), Medical and Dental Expenses." Irs.gov. 2007. Internal Revenue Service. 11 Aug. 2008 <http://www.irs.gov/publications/p502/index.html>.