Personal meetings in the office are a fine addition to our work. We meet the client instead of calling or emailing. In a meeting we prepare the tax return together with the client and explain details. Or we review the form filled in by the client, go over the questions and adjust the return if necessary.
One question that recurs in those meetings is, ‘can I deduct costs I made in my tax return? And more specifically, ‘I heard I can deduct my healthcare costs?’
For an answer to the first question, we go over the list of possible deductions mentioned in the tax return and the answer most often is no. If you didn’t pay any of those expenses last year, you won’t have a deduction either.
Healthcare expenses require a bit more attention and we take the time to do so. We all have healthcare expenses to a certain extent and often the client hopes that the expenses made are deductible, but is this really the case?
One of my clients mentioned that he had bought crutches after an unfortunate fall. Fortunately, he had made a full recovery; I had seen him walking into our office for the meeting. Unfortunately, I had to inform him the costs of crutches are not deductible in his income tax return.
I start with explaining to him that the health insurance premium, the own risk paid to the insurance company, and glasses, if client wears glasses, are not considered deductible healthcare costs. Yes, the glasses used to be, but this changed years ago. But what is deductible?
First, we have a look at the threshold. The threshold is income dependable, for tax partners the joint income is considered. When the total costs are below the threshold, we leave it at that as it is not worth the effort to look into more details. Presuming the crutches were deductible, my client would probably not have exceeded the threshold. When the costs meet the threshold, it may be worth looking further.
The costs must be:
- medically necessary expenses
- paid in the tax year
- not reimbursed by health insurance or others.
You must be able to prove the expenses and payments. Therefore, keep bills, statements from your health insurance and your bank statements.
Additional conditions are set for certain healthcare expenses and other expenses are excluded or limited deductible. For example, the glasses and crutches, but also a stair lift, mobility scooter and laser eye surgery are not deductible.
Furthermore, the conditions seem simple, but there are many discussions about ‘medical necessity’, for example. For instance, a rhinoplasty or ‘nose job’ may be necessary to improve breathing but may also be a choice for a different appearance. Opinions may differ on the necessity of the latter, but in that case, the costs are mostly at your own expense and are not deductible.
What costs may be deductible?
Examples of costs that may be deductible if the conditions are met and there was no compensation in return:
- dental expenses.
- treatment by a doctor
- nursing in a hospital.
- hearing aid, subject to conditions.
- orthopedic arch supports and soles.
- transport to a doctor, hospital, or specialist.
Do you have questions about your income tax return or healthcare expenses? Then contact the advisers at AAme Accountants & Tax Advisers, we will be happy to assist you.