Yet another tax question....medical expenses....

[AllyandJack]

I know it has to be 7.5% and, even though I've had about $100./week in co-payments, I'm just not making it. I've gotten over that. However, I have 2 questions:

1. COBRA payments. I read something about self-employed being able to deduct health insurance premiums and it not being subject to the 7.5% rule. DH was out of work, but not self-employed (he didn't work for 5 weeks and then started with another company that had a waiting period) and we paid for COBRA for about 5 months. How does that work if DH wasn't "self-employed" for that time? Not that I want to lie, but how would they even know? He did do some side work, but it wasn't a "business" and it was or friends so it's not like we got an income out of it.

2. Mileage. I read that transportation costs to receive medical treatment is deductible. My doctor is over 1.5 hours from my home. How do I calculate that? How much per mile? Do I add that into my other out-of-pockets and hope it reaches 7.5% or is that separate?

I've tried the IRS site and it's so hard to navigate I just gave up!

Thanks for any help!

 

[Lynn CC]

We are self employed and deduct 100% insurance premiums. It's over 10k a year. I do think that the 7.5% rule is correct, but I'm not sure about Cobra rules. I think that you can add in ANY Medical or Dental Expenses and Co-Pays! I'm hoping you get to deduct it, it's so expensive, isn't it. My accountant figures out all that for me, I wish I knew how to navigate the irs site. I got to look up something there and they don't make it very clear for the average person.

 

[AnaheimGirl]

1. Self employed people get to deduct 100% of health insurance premiums because they are a business expense. They likely have employees for whom they are paying premiums, which is considered similar to compensation from the employer's standpoint, and even if they're being paid for himself, it's as if he's his own employee. If your husband doesn't file a Schedule C with some income and other business expenses on it, he won't be considered as self-employed, and won't be able to deduct the premiums. Sorry.

2. Medical mileage rate is 15 cents a mile from Jan. 1 2005 to August 31 2005, and then 22 cents a mile from Sept. 1 2005 to Dec. 31 2005. This is from the IRS website:

Transportation
You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care.

You can include:
Bus, taxi, train, or plane fares or ambulance service,

Transportation expenses of a parent who must go with a child who needs medical care,

Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and

Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment.


Car expenses. You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. You cannot include depreciation, insurance, general repair, or maintenance expenses.

If you do not want to use your actual expenses, for 2005 you can use a standard rate of 15 cents a mile for use of a car for medical reasons before September 1, 2005. The standard rate allowed for use of a car when you use it for medical reasons after August 31, 2005, is 22 cents a mile.

You can also include parking fees and tolls. You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate.

Example.

Bill Jones drove 2,800 miles for medical reasons during the year (2,200 miles from January 1 through August 31 and 600 miles from September 1 through December 31). He spent $250 for gas, $5 for oil, and $50 for tolls and parking. He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction.

He figures the actual expenses first. He adds the $250 for gas, the $5 for oil, and the $50 for tolls and parking for a total of $305.

He then figures the standard mileage amount. He multiplies the 2,200 miles by 15 cents a mile for a total of $330, and the 600 miles by 22 cents a mile for a total of $132. His standard mileage amount is $462 ($330 + $132). He then adds the $50 tolls and parking for a total of $512.

Bill includes the $512 of car expenses with his other medical expenses for the year because the $512 is more than the $305 he figured using actual expenses.

Transportation expenses you cannot include. You cannot include in medical expenses the cost of transportation in the following situations.
Going to and from work, even if your condition requires an unusual means of transportation.

Travel for purely personal reasons to another city for an operation or other medical care.

Travel that is merely for the general improvement of one's health.

I hope this helps!

 

[EthansMom]

Also, the only amount that is deductible is the amount OVER 7.5%, so you may be going through all of this effort for very little reward. If your medical expenses exceed 7.5% by $10, then you only get to deduct $10, not 7.5% plus $10. Depending upon how far off you are from the 7.5% mark, you may want to consider giving up on it now.

My understanding is that for the self-employed insurance to be deductible, the insurance needs to be purchased in the company's name and the deduction is taken on line 29 of the 1040, so can not be used to add up to the 7.5% on Schedule A.

If you have the money and have not already done so, you might be able to contribute money into a Traditional IRA and deduct that contribution on line 32 of the 1040. Contributing to an IRA for me saves us quite a chunk of change each year.