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Getting a doctor's help for your illness and tax deductions

I have a cold. One with coughing. Coughing so much last night that my throat is sore and I have, for just the second time in my life, laryngitis. Yes, that is the hubby sitting over there with a big grin on his face.

A Visit to the Doctor book via  PaperSpongeI share my sad medical condition not for sympathy (although I'll take it!), but because one coughing fit had me seriously considering going to the doctor. That prospect, like the coughing spell, passed.

But as is usually the case in even my tax geeky life, it also got me thinking about when you need a doctor's diagnosis for tax purposes.

Office visits: When you go to your doctor for any treatment, regular checkup or unexpected illness, you likely will have to pay.

If you don't have insurance, you'll have to cover the full cost of the office visit.

If you do have insurance and you have a deductible, you could be asked to cough up (sorry; couldn't resist) some cash, depending on how much of your deductible you've met so far.

Even if you do have insurance and have met your deductible, you still might have a copay.

All these out-of-pocket doctor office expenses can count toward an itemized medical deduction claim.

Yes, I know most people take the standard deduction instead of adding up deductions on Schedule A.

And I also know that the 10 percent of adjusted gross income (AGI) requirement that took effect in the 2013 tax year is a lot. This means that if your AGI is $35,000 your eligible medical costs must be more than $3,500.

And it's only the "more than" amount, the dollars in excess of $3,500, that you can claim as itemized medical/dental expenses.

There is one exception on the itemized medical deduction percentage. If you're 65 or older, the previous 7.5 percent deduction cutoff applies through the 2016 tax year.

OTC medicine: Most of us who catch colds simply muddle through them with over-the-counter (OTC) treatments.

The Internal Revenue Service won't let you deduct all the aspirin, NyQuil, Sudafed, Cold-Eeze, etc. that you consume during the course of your cold as itemized medical expenses. However, if you have a medical flexible spending account (FSA), you might be eligible for reimbursement from that workplace account for the OTC treatments.

But thanks to another medical-related tax law change, you must get a prescription from your doctor for the OTC meds.

Yes, I know it sounds counter-intuitive. But I have gone to the doctor for severe cold before and in addition to an Rx for cough medicine, he also told me to take some general OTC meds.

In order for my FSA to pay me back for those basic treatments, I'd need for my doctor to give me a script for the OTC treatments, too.

Special medical needs: The old saying "take two aspirin and call me in the morning" no longer applies in many cases. Medical science has made tremendous strides in recent years, in part because more of us suffer from more esoteric ailments.

And these specialized illnesses require specialized treatment. In some cases, those out-of-the-ordinary costs can be deducted as a medical expense.

The key is "in some cases."

Take, for example, the growth of gluten-free products. While eating these items might make you feel better, you cannot deduct them as a medical expenses unless you have a medically diagnosed condition, such as Celiac Disease, which requires a special, doctor-prescribed diet for your health.

Then some the costs might be deductible as itemized medical expenses noted earlier. A March 24, 2011, Office of the Chief Counsel of the IRS letter noted:

"Specifically, the excess cost of specially prepared foods designed to treat a medical condition over the cost of ordinary foods which would have been consumed but for the condition is an expense for medical care…. Therefore, if a taxpayer can establish the medical purpose of the diet, such as through a physician's diagnosis, then to the extent the cost of the food for the special diet exceeds the cost of the food that satisfies a taxpayer's normal nutritional needs if the special diet were not required, the excess cost is an expense for medical care."

Basically, that means that when the medically prescribed gluten-free products cost $5 and the regular ingredients cost $3, then you can count $2 toward your medical expenses.

As for such things as weight loss programs, in some cases those costs are allowable medical deductions. Again, a doctor's diagnosis is required noting that weight is a medical issue that must be treated in connection with the patient's diagnosed heart disease, high blood pressure and the like.

And if your doctor recommends an air conditioner to treat your child's asthma, that home improvement also might be an allowable medical expense.

Again, in all these cases, there must be a legitimate, documented medical reason for the expenditure before it can be claimed as a tax deduction.

You need to keep copious records of both your doctor's diagnoses and prescribed treatments, as well as of the costs of the treatments.

And be sure to keep in mind that even if your special medical needs clear the doctor-prescribed hurdle, they still must, along with your other medical expenses, exceed the 10 percent itemized deduction threshold.

So talk with your doctor AND your tax adviser.

I hope you have a healthy, tax-saving new year. As for me, I'm going to take another OTC cold tablet and a nap.

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Stephanie Chen

These are some great things to keep in mind and thank you so much for posting before the calendar turns over! Thanks especially for the tip on OTC medicine. That's definitely something I'll keep in mind during my next doctor's visit.

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