Learning Center
Drug & Alcohol Addiction Treatments May Be Tax Deductible
Article Highlights:
Potential medical deductions
Medical dependents
Divorced parents
Medical AGI limitations
A taxpayer is allowed an itemized deduction for medical expenses paid during the taxable year and not compensated by insurance or otherwise for medical care of the taxpayer or the taxpayer’s spouse, dependent, or medical dependent.
Alcoholism and drug addiction are treated as medical ailments for tax purposes. People with addictions often cannot quit on their own; addiction is an illness that requires treatment. Generally, treatment expenses are tax deductible as itemized deduction medical expenses. Possible deductible expenses include the costs of:
Doctors
Prescribed medications
Laboratory testing
Psychological services
Treatment programs
Inpatient treatment at a therapeutic center for alcoholism or drug abuse, including meals and lodging furnished as necessary incident to the treatment
Counseling
Behavioral therapies
To claim these expenses for someone other than the taxpayer, the person must have been the taxpayer’s dependent or spouse either at the time that the medical services were provided or at the time that the expenses were paid.
Medical Dependent – Tax law does include a special provision that allows medical expenses to be deducted for an individual who does not meet all the requirements to qualify as a dependent. A person generally qualifies as a “medical” dependent for purposes of the medical expense itemized deduction if:
That person lived with the taxpayer for the entire year as a member of the household (temporary absence to obtain medical treatment is an exception) OR is related to the person,
That person was a U.S. citizen or resident or a resident of Canada or Mexico for some part of the calendar year in which the tax year began, and
The taxpayer provided over half of that person’s total support for the calendar year.
The medical expenses of any person who meets these qualifications may be included even if he or she cannot be claimed as a dependent on the taxpayer’s return.
Thus, the dependent’s age and income are not limiting factors in determining whether an individual is a dependent for purposes of deducting their medical expenses.
For example, suppose an adult child has an addiction problem. Even though the child is an adult and generates an income, a parent may still be able to deduct medical expenses that he or she pays for the adult child if the three requirements above are met. The parent must pay the medical service providers directly and not just give the money to the dependent to pay the bills.
In the case of divorced parents, if either parent qualifies to claim a child as a dependent, then each parent can deduct the medical expenses each paid for the child. However, consider the limitations (discussed below) that might preclude any deduction for one of the parents, and plan payments accordingly.
Two situations will prevent a taxpayer from deducting otherwise eligible addiction-related medical expenses. The first is that medical expenses are only allowed as an itemized deduction to the extent that total medical expenses exceed 7.5% of the taxpayer’s adjusted gross income (AGI). The second hurdle is that if the taxpayer’s standard deduction amount is greater than the total of all allowed itemized deductions, there’s no tax benefit to itemizing, and therefore, no medical expenses would be deductible. For 2023 and 2024, the standard deduction amounts are:
BASIC STANDARD DEDUCTION | ||
Filing Status | 2023 | 2024 |
Single & Married Separate | $13,850 | $14,600 |
Married Joint & Qualifying Surviving Spouse | $27,700 | $29,200 |
Head of Household | $20,800 | $21,900 |
A taxpayer, and spouse if married, age 65 and older, or blind, is allowed an additional standard deduction amount:
For 2023: $1,850 for single and head of household status; $1,500 for married (either joint or separate) and qualifying surviving spouse.
For 2024: $1,950 for single and head of household status; $1,550 for married (either joint or separate) and qualifying surviving spouse.
As you can see, these and other tax rules related to medical deductions can become complicated. If you need assistance in planning medical expenditures for maximum tax benefits or determining whether you can deduct certain expenses, please call.
NEVER MISS A STORY.
Sign up for our newsletters and get our articles delivered right to your inbox.
Rose Tax & Financial
Cedar Crest, New Mexico 87008
Sat: 10:00am to 2:00pm
Check the background of your financial professional on FINRA's BrokerCheck
Avantax affiliated Financial Professionals may only conduct business with residents of the states for which they are properly registered. Please note that not all of the investments and services mentioned are available in every state. Securities offered through Avantax Investment Services℠, Member FINRA, SIPC, Investment Advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through an Avantax affiliated insurance agency. 3200 Olympus Blvd., Suite 100, Dallas, TX 75019. 972-870-6000.
The Avantax family of companies exclusively provide financial products and services through its financial representatives. Although Avantax Wealth Management® does not provide or supervise tax or accounting services, Avantax representatives may offer these services through their independent outside business. Content, links, and some material within this website may have been created by a third party for use by an Avantax affiliated representative. This content is for educational and informational purposes only and does not represent the views and opinions of Avantax Wealth Management® or its subsidiaries. Avantax Wealth Management® is not responsible for and does not control, adopt, or endorse any content contained on any third party website.
This information is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
The information being provided is strictly as a courtesy. When you link to any of the web sites provided here, you are leaving this web site. We make no representation as to the completeness or accuracy of information provided at these web sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences.
For Important Information and Form CRS please visit https://www.avantax.com/disclosures.