(This is really just relevant to the American readers, I have no idea how taxes work elsewhere. Actually, I don't even have too much of an idea of how taxes work here, but I'm trying my best to figure it out.)
Dave has many strengths. One of them is not loading the dishwasher. It's alternately a source of amusement (Really? Loading the plates diagonally is the best way to go?) and contention (Dude! Why didn't you run this?! What else could possibly fit in here?!). He's finally figured out a good system, but used to say "How come no one's ever taught me this? How do other people figure it out?"
That's how I feel about taxes.
Normally we just send stuff to the accountant. But I often hear folks say "I deduct everything!" and I think "What the heck does that even mean? Deduct what? On what grounds? Where is the master list of things-you-can-deduct?" Until this year, I haven't really cared.
But, as all parents of children with special needs know, things add up--fast. Co-pays, prescriptions, privae therapies, medical equipment, hospital bills . . . there's a lot of stuff going on. So I've spent a few days trying my best to figure out what can be deducted and what can't.
Before I start my list, I must tell you 3 important things.
1. I am not an accountant. I have only the most basic understanding of what I'm talking about, most of it deduced from reading the IRS website and a few other sites. I AM NOT AN ACCOUNTANT. I hope the information below helps some folks, but please take the time to double check what I'm saying, as I am not an accountant and may not be making total sense.
2. As best as I can figure out, basically all of the things that you would deduct relating to your child's condition fall under "Medical". You have to add up all of your expenses and then you can deduct anything that is more than 7.5% of your total earned income. (So if you earned $1,000 last year, 7.5% of that would be $75. If you spend $100 on medical stuff, you would be able to deduct $25). So you have to spend a lot.
3. You probably do spend a lot. The biggest lesson of the past few days, for me, has been that I need to take the time to set up a system now. Start saving receipts for next year, start logging mileage, etc. If you keep track all year, it will only take a few minutes to add up next year and see if you can deduct anything or not.
Ok, so, with that said, here are some things that I've learned you can deduct:
1. Doctor/Hospital Stuff: Well, this is the most obvious. Anything you paid out of pocket, you can deduct---that means hospital bills, doctor's bills, co-pays for office visits, co-pays for lab tests, vaccinations, etc. (If you see a lot of doctors and specialists, like we do, or see out-of-network doctors, this adds up fast.)
2. Therapy Stuff: Evaluations, private therapies, again, if you pay it out of pocket and it's related to the disability, it's fair game.
3. Equipment: Splints, braces, walkers, therapy tools, special shoes/socks (for medical reasons, like to accomodate splints), wheelchairs (both the cost of purchasing and the cost of maintaining it), eyeglasses, hearing aids, and any other equipment used to address your child's medical needs can all be deducted, as best as I can understand.
4. Transportation: This one is kind of tricky, so here's the direct link to the transportation info. But here's the gist: You can deduct costs of traveling to and from medical appointments. For example, twice a week we drive to feeding therapy----we can deduct tolls, parking expenses, and gas/oil. Since gas and oil is pretty tricky to figure out, the IRS provides a standard medical mileage rate of 16.5 cents per mile.
So you can tally up the miles that you've traveled to and from appointments (if you saved copay receipts for appointments or having standing weekly appointments, it's not that hard) and then multiply by 16.5 cents per mile. Add in any tolls and parking fees, and that would be travel. (If you don't drive, there are also deductions for other modes of transportation listed.)
5. Insurance Premiums: Again, this one is complicated. If you pay for your health care, you can deduct it. Before you do, read all of this and make sure you're deducting the right thing.
6. Construction to your house/car: If you had to modify your house or call to make them handicap accessible, there's a way to deduct that stuff. I think it requires a whole separate worksheet, but it's out there.
7. Service Animals: Service animals and their associated costs are deductible, therapy animals are not.
8. Prescriptions: Whatever you pay (full price or co-pays, whichever) for prescription medicine is deductible. The key word here is prescription. If it's over the counter, it doesn't count.
There's no way for me to cover everything, but that's what I've learned. Here is the complete list of things that you can include and things that you can't.
Important notes: If insurance paid for a bill, you can't deduct it. You can only deduct the part insurance didn't pay. Similarly, if you have an FSA account, you can not deduct any bills or copays that you paid for out of that account (since that is tax free money to start with).
Maybe everyone already knows all of this stuff and I'm late to the game----but I think it's really helpful to make a list and share information like this. Please, tell me what I'm missing-----if you think I might have overlooked something that would help others out, leave a comment on this post so that we can all learn from it.
If you have a FSA available through work, it's more valuable to you to use the FSA than to deduct expenses. You don't have to exceed 7.5% of your AGI, and you can spend FSA money before it actually comes out of your paycheck - if you have big bills in the beginning of the year, the FSA will reimburse them up to your full amount selected for witholding.
Our FSA has saved us a considerable amount of money over the years, and we've never hit the threshold to deduct expenses.
Thanks CDM, that's good advice.
(Our FSA has a maximum that you can put in, and even though we used the max we'll still have some medical deductions this year. The private therapy, especially, puts us over the edge.)
After five years of dealing with this I have become a total dork about keeping track of every penny spent on Eliza's medical/therapy/pharmacy/etc. I set up a fairly simple Excel spreadsheet and each Sunday while drinking my coffee I spend a few minutes updating that week's expenses and then file the paper receipts by category. I've gotten fancy this year and once a month scan the receipts in to a pdf file. It makes it much easier than trying to go through a giant bin of receipts at tax season.
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