What are the Rules and Limitations of Deducting Drug Rehab Expenses?
The IRS has certain rules and limitations when it comes to deducting drug rehab expenses from your taxes.
The first and most important is that you can only deduct a total of what exceeds 7.5% of your Adjusted Gross Income. Therefore, if you have an AGI of $50,000 and you’ve attended rehab, you can only deduct the amount that goes over $3,750.
For example, if you’ve paid $10,000 out of pocket, you can deduct $6250 of those expenses. The IRS believes that utilizing 7.5% of your income is not as big of a dent as say, 20% of your income. Below we have some step-by-step instructions for calculating your rehab medical expense tax deduction.
So as you can see, deducting drug rehab costs is absolutely legal. Visit the IRS.gov site to learn more about drug rehab center tax deductions.
Why Are Drug Rehab Center Expenses Deductible?
Addiction is a disease, much like diabetes or any heart condition. Therefore, if you are being admitted to a program to treat the disease, it qualifies as a medical expense.
It’s not just an opinion that addiction is a disease but a medical finding and fact. The clinical term for addiction is Substance Use Disorder (SUD). The condition is listed in the DSM-5, the updated diagnostic manual for medical and clinical professionals. Any treatment related to solving the addiction problem is considered a medical expense.
What Can I Do to Prepare for Deducting Rehab Expenses from My Taxes Properly?
Here is a step-by-step how-to on gathering the information you need to claim the deduction for drug rehab on your taxes properly.
Gather all statements and proof of payments.
Calculate the amount paid in total medical expenses.
Calculate your Adjusted Gross Income for the year.
Deduct 7.5% of your AGI from the total you’ve calculated in medical expenses.
After you deduct 7.5% of your AGI from the total, you then have the amount that you can deduct and claim on your taxes.
If you are unsure if you can get through this step-by-step process, bring in a professional. That way, you can have peace of mind that your medical expenses are correctly calculated and deducted.
Taxes are complex, and calculating them on your own might make you uncomfortable. Having a professional on your side that knows the federal and state tax laws, mathematics and calculations is always your best bet.
