The IRS says you can now deduct weight-loss programs. Here's how.
Unless you've been holed up in your local Krispy Kreme (KKD) for the past few days, you've probably heard about the IRS's recent announcement that certain weight-loss expenses are now tax deductible. With so many Americans fighting the battle of the bulge, this has been front-page news.
Of course, most of this breathless discussion has neglected the tricky details of how your personal tax situation might actually be improved. And unfortunately, the majority of simple dieters will find that they don't have enough in the way of expenses to qualify. But don't despair. I have an alternative suggestion as to how you can still get this tax break even if you don't qualify under the conventional rules. Indeed, with a little maneuvering it may be possible to simultaneously slim down your waistline and your tax bill.
The New Basics
What qualifies under the new ruling? Good question. When the IRS makes a revenue ruling like it did this week, it simply provides a scenario or two, explaining that in this exact situation something is or isn't deductible. Tax professionals such as myself are then stuck trying to figure out whether other, similar situations might apply.
In this case, the revenue ruling deals with two hypothetical taxpayers. One was diagnosed by a doctor as obese, but had no other medical disorders. The second suffered from hypertension (better known as high blood pressure) and was told by a doctor to please slim down. The two individuals entered the same weight-loss program, which required an up-front payment and additional fees to attend meetings. At these powwows, participants received information on diet plans as well as other weight-loss literature. They were also encouraged to talk about the weighty matters they encountered while trying to shed pounds. (Tell me about it!) The IRS concluded both imaginary taxpayers could deduct the cost of the weight-loss program as a medical expense. (It wasn't covered by insurance.)
The obese person's deduction was allowed because the IRS now acknowledges that obesity is a disease in its own right. (Be advised: The medical definition of "obese" may be considerably stricter than your own interpretation of the term.) And because weight loss was recommended as a medical treatment for the other person's hypertension, that individual was also allowed a write-off. Now, the revenue ruling goes on to say you can't deduct the cost of reduced-calorie foods that simply replace "regular" foods in your diet. In other words, sorry: Eating is still considered a nondeductible activity.
That, in a nutshell, is what the IRS guidance says, and that's all it says. Needless to say, only a relatively few folks fit the precise situations described. If you're among them, congratulations! The government now officially allows you to claim this as a medical-expense deduction. The rest of us, meanwhile, must read between the lines in order to derive any tax savings from all of this.
So Will My Situation Qualify?
Most qualifying expenses are medical ones — meaning a licensed doctor is involved. So if you're overweight or have a weight-related ailment (such as high blood pressure, diabetes or a prediabetic condition), the most likely scenario goes something like this: The doc advises you to join a health club and maybe even hire a personal trainer. Your trainer may, in turn, recommend special foods, supplements and vitamins as part of an overall weight-reduction strategy.
Are all of these items really medical expenses? Some tax professionals may waffle like crazy to avoid giving a straight answer. Not me. I believe the door is now open to characterize these outlays as deductible medical expenses, provided you have a documented weight-related ailment or any other ailment treated with a weight-loss, weight-management or exercise program.
For example, say you have elevated cholesterol or high blood pressure (keeping in mind these conditions aren't always associated with excess poundage.) In these circumstances, your doctor will probably prescribe a continuous program of increased exercise (translation: membership at the local health club) as part, or maybe all, of the cure. If you're inherently lazy like me, you may need to hire a personal trainer to gain any real benefits. I think you're on solid ground in claiming these costs as medical expenses. If the prescribed activities must be continuous to deliver the needed health improvements, my view is that you should be able to continuously deduct the costs, just like you can with an ongoing drug prescription.
Moreover, the IRS says you can't deduct low-calorie foods that are mere substitutes for regular foods. But I believe protein supplements, high-fiber supplements and special vitamins are legitimate examples of deductible items, as long as they're part of a program to treat obesity or some other existing weight-related ailment.
No matter what, you'll need a note from your doctor to document your specific medical condition. The note should also recommend the specific weight-loss, weight-management or exercise program to be subsequently employed as treatment. Keep the note with your tax records in case you get audited. Of course, if you're already svelte and disgustingly healthy, you can't deduct your health-club membership, personal trainer, Slim Fast or vitamins — even though all those things clearly help you maintain your enviable status. So you're just going to have to look in the mirror for your reward.
The Fine Print
Still thinking you may qualify? Well, there's one additional hurdle you need to jump over, and it's a big one. (And it may not have been mentioned in all the media coverage you've seen.) Sadly, our beloved tax code says you can deduct medical expenses only to the extent that they exceed 7.5% of your adjusted gross income (the number at the bottom of Page 1 of your Form 1040). As a result, few people collect any appreciable tax savings — and most of them have huge medical bills from serious illnesses.
If you think you can jump this hurdle, the good news is that you can take this deduction for the 2001 tax year and for earlier years as well. You can claim a refund of previous-year taxes by filing an amended return using IRS Form 1040X. The amended return generally must be shipped off no later than three years after the original return's due date.
But even if your medical expenses don't reach the 7.5% threshold, there may be another way you can get the tax break: by participating in an employer-sponsored medical-expense reimbursement arrangement (often called a "flexible spending account" or a "cafeteria benefit plan"). These plans allow you to set aside part of your salary in a special account, which isn't taxed. You then turn in copies of your uninsured medical bills and receive tax-free reimbursements from your account. In effect, this is the same as getting a deduction. And if your employer doesn't offer one of these plans, your spouse's employer just might.
With these accounts, most of the costs mentioned earlier — a personal trainer, diet supplements and so on — should qualify as medical outlays, provided you have a doctor's note. Also, you'll probably need to increase your contributions in order to have enough money in your account to cover additional tax-free reimbursements for your weight-loss, weight-management or exercise regimen. If the plan administrator gives you any static about reimbursing your expenses (that wouldn't be a total surprise), just hand over a copy of this article to support your position.