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IRS Issues 2018 Version of Publication 502 (Medical and Dental Expenses)

EBIA  

EBIA  

IRS Publication 502 (Medical and Dental Expenses (for 2018 Returns))

Available at https://www.irs.gov/pub/irs-prior/p502–2018.pdf

The IRS has released the latest version of Publication 502 for use in preparing 2018 tax returns. Publication 502 describes the medical expenses that taxpayers may deduct on their 2018 federal income tax returns.

The 2018 version is substantially similar to its 2017 counterpart. Relevant dollar amounts (e.g., the standard mileage rate for use of an automobile to obtain medical care) have been revised to reflect their 2018 inflation-adjusted values. A note has been added, explaining that the rule for determining which expenses are deductible in a year differs from the rule for determining whether an expense can be reimbursed by a health FSA. In addition, the entry for breast pumps and supplies has been revised to clarify that “the costs of excess bottles for food storage” are not a medical expense, and the entry for fertility enhancement includes a reminder that the listed procedures must be performed on the taxpayer or the taxpayer’s spouse or dependent to qualify as medical expenses. Other entries with clarifications include special education, health savings accounts, and nonprescription drugs and medicines. The new version also reflects that the 2018 threshold for claiming an itemized deduction for unreimbursed medical expenses is 7.5% of adjusted gross income for all taxpayers (see our Checkpoint article), and that Form 1040A has been eliminated for the 2018 tax year.

EBIA Comment: Publication 502 provides valuable guidance on what qualifies as a medical expense under Code § 213(d) and can help identify the expenses that may be reimbursed or paid by health FSAs, HSAs, or HRAs, or covered on a tax-favored basis under other group health plans (e.g., employer-sponsored medical plans). But Publication 502 should be used with caution in connection with these benefits; because its focus is on deductibility of expenses, it does not account for certain differences in the rules for reimbursing expenses under health FSAs, HSAs, or HRAs. For more information, see EBIA’s Cafeteria Plans manual at Sections XX.D.7 (“Other Guidance Regarding What Is Medical Care: Caution Regarding IRS Publication 502”) and XX.D.8 (“Distinguishing Deductibility From Reimbursement of Medical Care Expenses (and Why It Matters)”). See also EBIA’s Consumer-Driven Health Care manual at Sections XV.B (“HSA Distributions Are Tax-Free If for Qualified Medical Expenses”) and XXIV.B (“HRAs May Reimburse Only Code § 213(d) Expenses”), and EBIA’s Self-Insured Health Plans manual at Section VI.B.1 (“Only Code § 213 Medical Care Receives Favorable Tax Treatment”).

Contributing Editors: EBIA Staff.

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