Although much attention is often paid to the child and dependent care tax credit or the dependency exemption during and after divorce proceedings, there is another often overlooked Federal tax deduction that deserves a similar level of attention: the Medical Expenses Deduction.
What is the Medical Expense Deduction?
The medical expense deduction is a Federal tax deduction that may be utilized by certain individuals to reduce their Federal income tax burden. Generally, in order for an individual to take advantage of the medical expense deduction, the amount of medical and dental expenses must be more than 10% of their AGI. Additionally, Schedule A on Form 1040 must be completed in order to take advantage of the medical expense deduction.
According to the IRS, deductible medical expenses are the costs associated with the “diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.” Medical expenses also include “Medical expenses that are not deductible include “expenses that are merely beneficial to general health, such as vitamins or a vacation.” IRS Publication 502, Medical and Dental Expenses.
Medical expenses also include health insurance premiums paid to cover medical expenses. Health insurance premiums paid for a spouse and children are also considered medical expenses for the purposes of the medical expense deduction. This is why it is important to consider this deduction both during and after divorce.
Why is it important to consider this deduction during and post-divorce?
For many, especially spouses who were responsible for paying medical expenses and medical insurance premiums for the other spouse and their children during marriage, and ex-spouses who are responsible for paying medical expenses and insurance premiums for their children post-divorce, the medical expense deduction may constitute a fairly significant itemized deduction on their federal income tax return.
Post-divorce, it is possible for both former spouses to potentially take advantage of this deduction if the qualifying medical expenses were paid from a joint checking account during the marriage. For example, a couple filing taxes in the year immediately following divorce may both take advantage of the medical expense deduction if medical expenses were paid out of their joint account during the marriage by allocating the deductible expenses equally between the spouses. In other words, each former spouse may claim half the expenses. Alternatively, a former spouse may deduct any medical expenses paid separately for him or her, for the other spouse, and for children. However, a former spouse may only deduct medical expenses paid on behalf of a spouse (or former spouse) if the spouses were married at the time the medical services were received or when the expenses were paid. Thus, former spouses ordered to continue providing medical insurance coverage for their ex-spouse post-divorce via COBRA or other insurance options may not deduct these costs. Such payments may be deductible as alimony however. On the other hand, non-custodial parents who continue to pay insurance premiums and medical expenses for a child or children post-divorce may deduct those costs of their federal income tax return even though the other former spouse may have custody of the children.
For more information on this deduction and the other deductions and exemptions that may be beneficial to divorced and divorcing individuals, see IRS Publication 502, Medical and Dental Expenses, and IRS Publication 504, Divorced or Separated Individuals.