Generally Allowable Medical Expenses
The rent calculation for many affordable housing programs, including HUD Section 8 and Rural Development Section 515, is based on the “adjusted” income of households. Adjusted income is the “gross” income of a household, minus certain permitted deductions. These deductions are (1) a dependent deduction; (2) a deduction for disability related expenses; (3) a childcare deduction; (4) a deduction for elderly households; and (5) a deduction for unreimbursed medical expenses, which is available only to elderly households. Of these five possible deductions, one of the most confusing and difficult to properly verify and determine is the deduction for medical expenses.
Elderly households (62 + or handicapped/disabled) may deduct medical expenses in excess of 3 percent of gross income. These are unreimbursed medical expenses expected to occur during the 12-month period following the effective date of the certification.
Based on recent discussions with HUD, the following are “examples” of medical expenses that are deductible and nondeductible. (Keep in mind – this is not an exclusive list).
Examples of Deductible Medical Expenses
Services of recognized health care professionals, including physicians, nurses, dentists, opticians, mental health practitioners, osteopaths, chiropractors, Christian Science practitioners, and acupuncture practitioners.
Services of health care facilities, laboratory fees, x-rays, and diagnostic tests, blood and oxygen. Such fees include hospitals, HMOs, laser eye surgery, outpatient medical facilities, and clinics.
Alcoholism and drug addition treatment.
Medical insurance premiums, including expenses paid to an HMO, Medicaid insurance payments that have not be reimbursed, and non-prorated long-term care premiums.
Prescription and non-prescription medicines (aspirin and antihistamine may be deducted only if prescribed by a physician for a specific medical condition.
- Also, any other medically necessary service, apparatus or medication, as documented by third party verification.
Transportation to and from treatment and lodging based on actual cost (e.g., bus fare). If driving a car, a mileage rate based on IRS rules (currently $.23 per mile).
Medical cost of permanently institutionalized family members if his or her income is included in annual income.
Dental treatment, such as fees paid to a dentist, x-rays, fillings, braces, extractions and dentures.
Eyeglasses, contact lenses.
Hearing aid and batteries, wheelchair, walker artificial limbs, Braille books and magazines, oxygen and oxygen equipment. This includes the purchase and upkeep of such equipment, including additional utility costs to the tenant because of an oxygen machine.
Attendant care or periodic medical care, such as nursing services, assistance animal and its upkeep.
Payments on accumulated medical bills (scheduled payments only).
Examples of Nondeductible Medical Expenses
Cosmetic surgery, if unnecessary, such as surgery to improve a person’s appearance and not meaningfully promoting the proper function of the body or prevent or treat illness or disease. Procedures such as face-lifts, hair transplants, hair removal (electrolysis), and liposuction generally are not deductible.
- However, if one of these procedures results in medical complications, such as infections, that require medical treatment, the treatment expense would be an eligible deduction.
- Amounts paid for cosmetic surgery to improve a deformity arising from, or directly related to, a congenital abnormality, an injury from an accident or trauma, or disfiguring disease, may be deducted.
Health club dues, such as membership in any club organized for business, pleasure, recreation, or other social purpose, such as YMCA dues, or amounts paid for steam baths for general health or to relieve physical or mental discomfort not related to a particular medical condition.
Household help, even if such help is recommended by a doctor. However, persons providing nursing type services may be deducted. Certain maintenance or personal care services provided for long-term care may be deducted.
Medical savings account, such as a Archer MSA.
Nutritional Supplements, vitamins, herbal supplements, and natural medicines. These may be deducted if recommended in writing by a medical practitioner licensed in the locality where practicing. These items must be recommended as treatment for a specific medical condition diagnosed by a physician or other health care provider licensed to make a diagnosis in the locality where practicing. When taken to maintain ordinary good health, these items are not deductible.
Personal use items. Items ordinarily used for personal, living or family purposes may not be deducted, unless it is used primarily to prevent or alleviate a physical or mental defect or illness (this is why HUD will not generally permit the cost of medical alert devices to be deducted). However, the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his or her hair from disease can be deducted, as could incontinence supplies.
Non-prescription medicines. These may not be deducted unless they are recommended in writing by a licensed medical professional. The item(s) must be recommended as treatment for a specific medical condition.
While this is not a complete list of every conceivable deduction, it should provide comprehensive guidance on the type of medical expenses that may be deducted. Also, since most rules have exceptions, some items which may not have their costs deducted could, under some circumstances, be deducted.
If you have questions, or would like to discuss a specific situation, please feel free to contact me directly.