The IRS has issued proposed regulations that would revise Reg. §1.213-1 to allow medical deductions in certain cases for payments for direct primary care arrangements and healthcare sharing ministry memberships.[1]

The preamble states:

…[T]he Treasury Department and the IRS propose that expenditures for direct primary care arrangements and health care sharing ministry memberships are amounts paid for medical care as defined in section 213(d), and that amounts paid for those arrangements may be deductible medical expenses under section 213(a). The proposed regulations also clarify that amounts paid for certain arrangements and programs, such as health maintenance organizations (HMO) and certain government-sponsored health care programs, are amounts paid for medical insurance under section 213(d)(1)(D).[2]

In a story posted on August 1, 2019 we noted that DNA testing firm 23andMe had reported receiving a private letter ruling from the IRS that allows for a portion of a DNA test kit fee paid for ancestry and health testing qualified as a deductible medical expense under IRC §213. The ruling (PLR 201933005) has been posted by IRS.

While most taxpayers do not itemize, and even those that do often have not incurred the necessary amount of medical expenses to begin to deduct them on Schedule A, the ruling clears the way to use HSA funds to reimburse the taxpayer for the medical portion of the fee. As well, flexible spending accounts also should be able to reimburse such amounts as well.

The fact that a medical treatment may not be recognized as a proper treatment by medical authorities does not mean that federal tax law will deny the taxpayer a deduction for such expenses.  In a bench opinion, the Tax Court in the case of Malev v. Commissioner, Tax Court Case No. 1282-165 held that the taxpayer would be allowed a deduction for such expenses even though the only diagnosis she cited as evidence of her condition took place after the treatments in question, calling into question her belief that her unusual treatment had cured her.

The Court noted that the treatments the taxpayer sought to deduct related to her spinal conditions were outside the norm, noting:

Concerned that conventional treatments for her condition posed too much risk, or were or would be ineffective, Petitioner subscribed to various forms of treatment from four individuals, none of whom would be commonly recognized as a conventional medical caregiver. And to be sure, none of the methods utilized by these individuals would commonly be recognized as a conventional medical treatment. The methods Petitioner subscribed to might be termed “alternative medicine” by the polite, but we expect the less tolerant would characterize the treatments in other than legitimate or complimentary terms.

Image copyright mindscanner / 123RF Stock Photo