IRS Publication 502 (Medical and Dental Expenses (for 2019 Returns)); IRS Publication 503 (Child and Dependent Care Expenses (for 2019 Returns))
The IRS has released updated versions of Publications 502 and 503 for the 2019 tax year. Publication 502 describes the medical expenses that are deductible by taxpayers on their 2019 federal income tax returns. Publication 503 explains the requirements that taxpayers must meet to claim the dependent care tax credit (DCTC) under Code § 21 for child and dependent care expenses. The 2019 versions are substantially similar to their 2018 counterparts. Relevant dollar amounts (e.g., the standard mileage rate for use of an automobile to obtain medical care) have been revised to reflect their 2019 inflation-adjusted values. References have also been added to the new Form 1040-SR (U.S. Tax Return for Seniors).
EBIA Comment: Publication 502 provides valuable guidance on what qualifies as a medical expense under Code § 213(d), and thus helps 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 it addresses the deductibility of medical expenses without accounting for differences in the rules for reimbursing expenses under health FSAs, HSAs, or HRAs. Likewise, Publication 503 is written primarily to help taxpayers determine whether expenses qualify for the DCTC. While similar requirements must be met for expenses to be reimbursable under a DCAP, there are some differences, so caution is advised when consulting the publication for this purpose. For example, the DCTC and DCAPs have different rules about the maximum amount and timing of expenses that can be taken into account. 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”), XX.D.8 (“Distinguishing Deductibility From Reimbursement of Medical Care Expenses (and Why It Matters)”), XX.M (“Table of Common Expenses, Showing Whether They Are for ‘Medical Care’”), XXIII.C (“DCAP Participation vs. Claiming the Dependent Care Tax Credit”), and XXIV (“What Expenses Can Be Reimbursed Under a DCAP?”). 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.