Did You Know You Can Write Off Rehab?
Looking for deductions on your taxes? Why not recoup some of the costs of rehabilitation and addiction treatment? Yup. Medical expenses are completely eligible to itemize on your taxes. When you itemize expenses you’re essentially telling the IRS,
“Hey government, I spent more in treatment than you’re going to reimburse me normally. Please fix this.”
The IRS stipulates medical costs which can be defined under the following are tax deductible “[The] diagnosis, cure, mitigation, treatment, or prevention of disease.” That sounds like detox, inpatient and outpatient rehabilitation, sober living communities, continuing therapy, prescribed medications, and expenses incurred from sober groups, clubs, or organizations.
When you list individual expenses on your taxes this is called itemization. Read on to learn how to apply them to your taxes.
But remember if the total of your itemized list is not equal to or greater than the tax return you are initially entitled to, you may lose money. Ensure to consult a tax consultant– or use TurboTax. The program will notify you if you’re making a potentially poor fiscal decision.
(Basically, TurboTax will yell at you if you’re about to make yourself lose money.)
How Are You Paying for Rehab?
To figure out how to write your treatment expenses off think about all the resources you’ve used to cover your costs. In addition to paying out of pocket (which counts), here are some ideas:
- Health Insurance (Remember those monthly payments?)
How to Write Off Addiction Treatment on Your Taxes
To write off your rehab and recovery expenses you’ll need to fill out a Schedule A form– which is available on TurboTax (which is free). A Schedule A form (also called a 1040) allows you to “itemize” all of your expenses related to rehabilitation and treatment. You’ll need to keep an accurate rendering of your expenses throughout treatment. So hold on to your bills and receipts to the doctor’s office, prescription medications, therapy costs, housing accommodations (for instance, you can write off halfway home expenses), the cost of gas to travel to treatment, job searching, dental work, and any medical treatment which “exceeds more than 10 percent of your adjusted gross income for the year.”
An easy way to keep track of your expenses is to print out your credit card statements and stick them in a digital folder or printed tax folder.
How to Calculate Your Rehab Deductions
For instance, if you make $30,000 a year and your rehab costs total $10,000 you may deduct any rehab expenses over $3,000 for this adjusted gross income. Your total deduction would equal $7,000
Calculate Your Addiction Treatment Deductions:
1. What is 10% of your total gross income?
2. Take 10% of your total gross income and subtract that number from your total rehab expenses.
3. The difference from the calculation in step two is the total amount of your deduction.
You don’t necessarily take these steps to fill out a 1040 form correctly. You’ll only be responsible for providing a final total of all expenses. (Remember, you may be asked to furnish proof.)
What Addiction Expenses Can You Write Off?
If you’re paying for a medical or mental health service you can write them off on your taxes! If you’ve missed out on opportunities in the past three years you can include those expenses with proof of receipt.
- Inpatient Medical Detox
- Inpatient Rehabilitation
- Outpatient Rehabilitation
- Continuing Therapy Costs
- Halfway Home Programs
- Prescription Medications
- Intervention Services
- Laboratory Expenses
- Non-Traditional Therapies (for instance, seeing an acupuncturist)
- Any Medical Work
Read up on more medical deduction ideas here— and from the IRS directly.
If you are a family member footing the bill for addiction treatment there are some restrictions on which deductions you can file. For instance, loved ones are limited to only writing off expenses not covered by insurance. However, if an adult is listed as your dependent, and they did not make a gross income of over $3,950 you may be able to deduct all expenses for treatment.
Now you know how to write off your rehab and treatment costs! Happy taxing.
(Here are some unexpected things you can write off on this year’s taxes.)