          
          
          
                             Medical Expenses
          
          
          38) A critical strategy for maximizing medical expense
          deductions is known as "bunching." The idea is to pay
          as many medical bills in one year as possible.  The
          7.5% floor on medical expense deductions requires this
          tactic.  Once your medical bills for the year exceed
          the floor, all expenses above that amount are fully
          deductible.  So you want to make payments that year
          whenever possible instead of waiting until next year
          when you must start trying to exceed the floor again.
               When emergency care and necessary surgery occur,
          you can do little to change the timing.  But you can
          influence elective surgery and continuing care
          expenses.  The first step is to determine how likely
          you are to exceed the 7.5% floor this year.  If you are
          unlikely to exceed it, then you want to defer whatever
          payments you can.  Put off any elective treatments and
          when possible avoid paying bills until after December
          31st.  In a year where you are likely to exceed the
          floor, you want to pay all the expenses that you've
          been deferring or considering.
               For instance, if there is an elective surgery that
          you've been considering, have it done only in a year
          when you think the floor will be surpassed.  When you
          pay for long-term care such as a nursing home, try to
          prepay for two years at a time or whatever you can
          afford.  If you visit a doctor in December, be sure the
          bill is paid by December 31st.  Most importantly,
          examine this report thoroughly for deductible expenses
          that you might have overlooked.
               With bunching, you generally adopt a two-year
          strategy.  One year you pay all the expenses you can
          and take the deductions.  The following year, unless
          unexpected expenses come up, you pay only the expenses
          that must be paid because you probably won't exceed the
          7.5% floor for deductions.
          
          39) One way around the floor on medical expense
          deductions is to reclassify your medical expenses as
          something else.  For instance, if a nurse must be hired
          to look after your spouse or a dependent so you can go
          to work, consider taking the dependent care credit
          instead of the medical expense deduction.  When an
          attendant is needed to take you to work or accompany
          you on business trips, you should try deducting the
          cost as a business expense.  In one case a psychiatrist
          was encouraged by the directors of his residency
          program to undergo psychotherapy.  They said the
          treatment would not only solve his personal problems
          but would make him a better psychiatrist.  Rather than
          treating the cost as a medical expense, the doctor
          chose to treat it as a business education expense, and
          the Tax Court agreed.  (Porter, 86 TC No. 13 (Feb. 13, 1986)).
          
          40) You can pay your parents' medical expenses with
          their cash and take the deductions yourself.  If your
          parent makes an unconditional gift to you, the money is
          then yours.  It is not taxable income.  You can use
          that money however you want to, and if you want to pay
          your parents' medical bills that's fine.  You'll be
          paying the expenses with your money.  When the parent
          is your dependent, you can take the medical expense
          deduction.  One taxpayer got a power of attorney from
          the parent and shifted funds from the parent's account
          to his whenever bills had to be paid.  After the money
          was deposited in the son's checking account, it became
          his.  He paid the medical bills and was entitled to
          deduct the expenses.  An important point is that the
          money must be transferred to your personal checking
          account before the bills are paid.
          
          41) The cost of a health club membership can be
          deductible.  The way not to get the deduction is to
          claim that your employer requires you to stay in
          excellent physical shape, as a police officer found
          out.  (Revenue Ruling 78-128).  But you can get the
          deduction if the membership is prescribed by your
          doctor to treat a specific physical ailment, such as
          high blood pressure or arthritis or to rehabilitate an
          injured body part.  Get the doctor's order in writing
          and don't be buffaloed by IRS employees who try to tell
          you it's not deductible.  But note that the membership
          must be part of the treatment for a specific problem. 
          If the doctor orders you to lose weight or improve your
          overall physical condition, it is not a deductible
          expense.
          
          42) All or part of the cost of a nursing home can be
          deductible.  If a principal reason for placing someone
          in the nursing home is to obtain full-time medical
          care, the entire cost of the home is deductible.  (Reg.
          Sec. 1.213-1(e)(1)(v)(a)).  Even when you don't meet
          this test, you can still deduct the portion of nursing
          home expenses related to medical care.  The nursing
          home should be able to give you an itemized breakdown
          of the portion of the cost that is related to medical
          care or provide an estimate that will be acceptable to
          the IRS.  If you pay the expenses on behalf of someone
          who is dependent, the expenses are deductible to you. 
          But if you make a lump sum payment for lifetime care,
          the expense cannot all be deducted in the year of
          payment.  It must be deducted equally over the expected
          lifetime or some other period.
          43) Personal mileage related to medical care is
          deductible.  Your mileage incurred on trips to and from
          your doctor's office or other place you receive medical
          care are deductible miles.  The trip must be
          essentially and primarily for medical care.  (Reg. Sec.
          1.213-1(e)(l)(iv)).  You can take the standard mileage
          rate of nine cents per mile or deduct actual expenses. 
          With these trips you cannot deduct depreciation and
          repairs, as you can for business mileage.  That's why
          the mileage rate is lower than the business standard
          mileage rate.  Any rides you give to a dependent that
          are related to medical care are deductible.
          
          44) Overnight lodging can be a deductible medical
          expense.  When a trip is taken primarily for medical
          care and is essential to the care, you can deduct the
          cost of overnight lodging.  The medical care must be
          performed by a physician at a licensed hospital or
          equivalent medical care facility.  If the medical care
          is for a dependent and your presence is needed to
          approve operations or for some other reason, the cost
          of your lodging is deductible.  The deduction is
          limited to $50 per night, and meals are not deductible.
          
          45) Don't miss out on these little-known medical
          expenses.  Many taxpayers are incurring deductible
          expenses without knowing it.  Here is a list of the
          deductible expenses and the authority for deducting
          them.
               *    Acupuncture (Revenue Ruling 72-593)
               *    Air conditioner required for allergy relief
          (Revenue Rulings 55-261 and 68-212)
               *    Alcoholism treatment (Revenue Ruling 73-325)
               *    Attendant to accompany blind child (Revenue
          Ruling 64-173)
               *    Braille publications, to extent cost exceeds
          cost of regular editions (Revenue Ruling 75-138)
               *    Capital improvement to property when primary
          purpose is medical care (Examples: swimming pool, air
          conditioning.  Deductible only to extent cost exceeds
          increase in value of the property.)  (Reg. Sec. 1.213-1(e)(iii)).
               *    Chiropractors (Revenue Ruling 63-91)
               *    Christian Science treatment (Special Ruling
          2-2- 43)
               *    Clarinet lessons to alleviate dental
          malocclusion (Revenue Ruling 62-210)
               *    Contact lenses (Revenue Ruling 74-429)
               *    Contraceptives by prescription (Revenue
          Ruling 73-200)
               *    Cosmetic Surgery, if medically necessary
          (Revenue Ruling 74-429)
               *    Dental Work (Reg. Sec. 1.213-1(e)(i))
               *    Domestic aid, such as nursing care (Revenue
          Ruling 58-339)
               *    Drug addiction recovery (Revenue Ruling
          72-226)
               *    Prescription drugs (Internal Revenue Code
          Section 213(b))
               *    Educational aids for blind student (Revenue
          Ruling 58-223)
               *    Electrolysis (Revenue Ruling 82-111)
               *    Elevator (so cardiac patient won't have to
          climb stairs) (Revenue Ruling 59-411)
               *    Halfway house (Letter Ruling 7714016)
               *    Hearing aids (including specially equipped
          telephone, closed caption television decoder, and
          visual alert system) (Revenue Rulings 73-189, 80-340
          and Letter Ruling 8250040)
               *    Indian medicine man (Tso, 40 TCM 1277)
               *    Insurance (Reg. Sec. 1.213-1 (e)(2))
               *    Lead paint removal (Revenue Ruling 79-66)
               *    Lifetime medical care, prepaid (Revenue
          Ruling 75-302)
               *    Lip reading lessons for the deaf (Revenue
          Ruling 58-280)
               *    Mattress to alleviate arthritis (Revenue
          Ruling 68-212)
               *    Notetaker for deaf student (Baer Estate, 26
          TCM 170)
               *    Orthodontia (Reg. Sec. 1.213-1(e)(1)(ii))
               *    Patterning exercises for handicapped child
          (Revenue Ruling 70-170)
               *    Psychiatric care (Revenue Ruling 55-261)
               *    Schooling, for special relief of handicap
          (Revenue Ruling 70-285)
               *    Sexual dysfunction (Revenue Ruling 75-187)
               *    Swimming pool (for treatment of polio)
          (Letter Ruling 8208128)
               *    Taxi to doctor's office (Revenue Ruling
          68-212)
               *    Transplant, donor's costs (Revenue Ruling 68-
          452)
               *    Wig (Revenue Ruling 62-189)
               Cosmetic surgery is no longer a deductible medical
          expense under all circumstances.  Now the surgery must
          be medically necessary in order to qualify as a
          deductible medical expense.
          
          
          
