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Tax Deductions for Medical Expenses

How to Reclaim Some of What You've Spent for Breast Cancer Treatment

By Lia Tremblay

Updated May 15, 2008

(LifeWire) - If your medical expenses are piling up during breast cancer treatment, you should be able to recoup at least some of your out-of-pocket costs on next year's taxes. You may be surprised at what qualifies as a medical expense, such as wigs, psychotherapy and transportation, just to name a few items that may be claimed as tax deductions.

Can Anyone Deduct Medical Expenses?

The federal government places a minimum on the medical expenses you must accrue in a given year to deduct them on your taxes. They must exceed 7.5% of your adjusted gross income (AGI). (Check last year's taxes for a reference if you're not sure of this number.)

For example, if your AGI is $40,000, your expenses would have to be at least $3,000 or more to be of any use on your taxes.

For most taxpayers, that threshold puts the medical deductions out of reach. For breast cancer patients, the required total could easily be met or exceeded. Expenses associated with treating breast cancer vary widely depending on your condition, your treatment and your insurance coverage.

One study found the average cost for the first year of breast cancer treatment ranged from $16,226 to $39,305. However, more recent estimates go as high as $50,000 to $100,000, according to Dr. Stephen Edge, who is a medical director at the Breast Center at Roswell Park Cancer Institute in Buffalo, N.Y., who was interviewed in 2007 for ABC News.

How Do I Do It?

If you usually do your own taxes, but are not used to the complicated itemizing process, this may be the year to hire an accountant who can get it all organized for you. If you'd like to forge ahead on your own, here are the basics:

  • You can deduct expenses that you paid for yourself, a spouse, a dependent child, or any other dependent relative whose health care you financially supported.
  • You cannot claim anything that was reimbursed through a flexible spending account (FSA).
  • You must have good records (receipts, bank statements etc.) that account for every eligible expense (explained more as follows).
  • You must file a Schedule A, Form 1040. The simple 1040 alone or the 1040 EZ cannot be used to deduct these expenses.

What's Deductible?

The IRS has a fairly broad interpretation of what qualifies as an eligible medical expense. More than just co-pays and prescriptions, it can include just about any expenses incurred as a direct result of medical or dental care. A full explanation is available in IRS Publication 502, "Medical and Dental Expenses."

For a breast cancer patient, examples include:

  • Transportation to and from treatment, and lodging if an overnight stay was required
  • Wigs purchased after hair loss due to illness or treatment
  • Breast reconstruction surgery after a mastectomy
  • Payments made to a smoking cessation program, but not for over-the-counter treatments, such as nicotine gum or patches
  • Home improvements to increase accessibility, such as lowering kitchen cabinets or installing closet systems that reduce the need for high reaching
  • Physical therapy or drug therapy -- such as Tamoxifen or Herceptin, prescribed during or after your breast cancer treatment -- or whatever your insurance doesn't cover

What's NOT Deductible?

It's easy to get carried away and start piling up receipts for every little thing. But don't include items that are not directly connected to necessary medical or dental care. Examples include:

  • Purely cosmetic procedures, such as hair removal or teeth whitening
  • Nutritional supplements, unless prescribed as part of your condition
  • Insurance premiums or contributions to a flexible spending account

How Do I Keep Track of it All?

Designate a capable family member to be the record keeper. This person should keep a file that contains every record -- receipts, canceled checks etc. -- that you'll need to make your claim. It may be helpful to enter each of these on a chart as they come in to avoid swimming through a sea of papers at the end of the year.

Sources:
American Cancer Society Staff, "Insurance Issues." Cancer.org. 26 Oct. 2005. American Cancer Society. 29 Apr. 2008.

Bradley, C. "Influence of Surgical and Treatment Choices on the Cost of Breast Cancer Care." The European Journal of Health Economics. 4 (2003): 96-101. (subscription)

Internal Revenue Service Staff, "Publication 502 (2007), Medical and Dental Expenses." IRS.gov. 2007. Internal Revenue Service. 29 Apr. 2008.

LifeWire, a part of The New York Times Company, provides original and syndicated online lifestyle content. Lia Tremblay is a freelance writer and editor specializing in consumer healthcare topics. She lives and works in Virginia.
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