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Unformatted text preview: 109 Chapter 8 Deductions: Itemized Deductions SUMMARY OF CHAPTER Personal expenses deductible from adjusted gross income are referred to as itemized deductions and are deductible on Schedule A of Form 1040. No deduction is allowed unless the Code specifically states that the personal expense is deductible. Medical Expenses 8001 Requirements for the Deduction An itemized deduction is allowed for expenses paid for the medical care of the taxpayer, spouse, or a dependent. The deduction is allowable only for medical expenses actually paid during the year, regardless of when the expenses were incurred or the method of accounting used by the taxpayer. The expense must not be compensated for by insurance or otherwise. Only such medical expenses as exceed 7.5 percent of adjusted gross income for the year are deductible. 8015 Medical Care Expenses The term medical care is broadly defined to include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease. Further, expenses paid for medical care include those paid for the purpose of affecting any structure or function of the body or for transportation primarily for and essential to medical care. Payments for unnecessary cosmetic surgery to improve the patients appearance are not deductible medical expenses. 8025 Capital Expenditures Capital expenditures for home improvements and additions which are added primarily for the medical care of an individual generally qualify for a medical expense deduction only to the extent that the cost of the improvement or addition exceeds any increase in the value of the affected property. The entire cost of additions or improvements that do not increase the value of the home is deductible as a medical expense. 8035 Transportation and Lodging Expenses Expenses paid for transportation primarily for and essential to the rendition of medical care are expenses paid for medical care. However, the transportation deduction does not include the cost of any meals while away from home receiving medical treatment. In lieu of a deduction for actual expenses incurred, a standard mileage rate of $.19 per mile for 2008 is allowed in computing the cost of operating an automobile where transportation expenses are deductible as medical expenses. 8045 Hospital and Other Institutional Care The cost of in-patient hospital care, including the cost of meals and lodging, is an allowable deduction for medical care. Expenses for care in an institution other than a hospital (e.g., a nursing home, home for the aged, or therapeutic center for alcohol or drug addiction) may qualify as a deduction for medical care. 8055 Medicines and Drugs Only amounts paid for insulin and prescription medicines or drugs are deductible as a medical expense....
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This note was uploaded on 11/17/2010 for the course FI 515 FI 515 taught by Professor Senn during the Spring '10 term at Keller Graduate School of Management.
- Spring '10