Steve Mendelsohn, a Washington-based attorney and public policy analyst for MS issues, shares his thoughts with MoveOverMS™ on disabilities, deductions, and the need to be candid with your accountant.
Anyone with a chronic condition should first make sure they choose a tax preparer with whom they feel comfortable discussing the tax implications of their condition. That way the preparer can be alert to possible deductible expenses and to financial planning issues that are related to the condition. This is especially important to keep in mind when it is a spouse or other family member who meets with the tax accountant.
When the preparer is aware of the disability, he or she can take into consideration what I call “quasi-medical expenses.” That’s not a technical term, just a descriptive term. These are things that might not, strictly speaking, be classified as medical, but could be deductible if their purpose was to mitigate the effects of MS. If you need someone to assist you with such everyday activities as dressing or bathing, then that person’s salary is deductible. And, if these expenses are deductible, then any benefits you pay on behalf of the worker – such as Social Security, taxes, or other benefits – may be deductible as well.
The same thing applies with respect to employment. You can take into consideration any expenses incurred in connection with working, such as special transportation or other assistance, that would not have been incurred except for the condition. These might be eligible for deductibility under another itemized deduction, a little-known one called the Impairment Related Work Expense Deduction.
Modifications made because of the condition should definitely be taken into consideration. It could be something as simple as installing ergonomically correct filing cabinets. Or moving the phone to the side of the bed or chair that’s more accessible to one’s better arm.
Let’s say you use an assisted device either permanently or from time to time and you have to modify your home in order to accommodate the device; then the cost of that modification would qualify. Widening a doorway or installing a ramp could be a medical expense deduction. But if the expenditure increases the value of the home, then you might not get to take it as a deduction. Instead, you could be able to deduct it later for capital gains purposes when you sell the home.
If someone has to move to a larger apartment or house to accommodate a live-in caregiver or for accessibility issues, then the extra costs entailed might be deductible as well.
Let’s assume that you have to buy a lift-equipped van to accommodate an assisted device. After all, how else can you get something that potentially weighs a couple of thousand pounds into a vehicle? So yes, this cost should be taken into account.
The most important thing is to be aware that you need to substantiate everything you claim. And you need to think very carefully about what kind of records you keep. Make sure you document these activities and expenses in a way that doesn’t cause the IRS to assume that you were just getting regular household help.
Yes, keeping daily records is the best way. If someone is coming into your home every day and spending three hours doing housecleaning and feeding your kids and three hours helping you dress and bathe and so forth, then you should keep daily timesheets which reflect this.
Always remember that you have to prove that the expenses were incurred to help you navigate through life because of your condition. And be sure to keep records the way the IRS specifies.