When a person completes their taxes every year, calculations determine if a person has paid too much or too little into the federal government the previous year. When a person has paid in too much, they receive a refund, when they pay too little, they owe money to the Internal Revenue Service.
When someone has a tax deduction, it lowers the amount of money a person is required to pay taxes on. If a person selects a standard deduction, the amount of deductions is automatically declared for them (it can vary year to year).
However, if a person decides to itemize their deductions, they provide receipts for qualifying deductions and use that total to lower the total amount of money they would pay taxes on.
This means if your deductions for the year total more than the standard deduction (in 2019, this was $12,200 for individuals), it would be better for you to choose to itemize your deductions on your yearly taxes.
Is Alcohol And Drug Rehab Tax Deductible?
Alcohol and Drug rehab is a medical cost, and medical costs can be deducted on your taxes as long as: 1. your medical and dental cost is more than 7.5 percent of your yearly adjusted gross income, and 2. you itemize your deductions using a Schedule A form on your taxes.
So if your yearly adjusted gross income was $30,000, any medical expenses over $2,250 can be deducted. For example, if rehab costs $7,500, you could deduct $5,250 of rehab cost on your taxes.
What Parts Of Rehab Are Tax Deductible?
The Internal Revenue Service (IRS) Tax Code § 213(d)(1)(A) defines medical costs as “the diagnosis, cure, mitigation, treatment, or prevention of disease”. Addiction is a disease, and attending a rehab meets criteria for medical costs as outlined by the IRS.
Medical costs that qualify as tax deductions are only those that you pay out of pocket. They do not include any payments made by your insurance company on your behalf. However, insurance premiums also count toward medical cost deductions.
Illegal treatments or methods are not included in acceptable tax deductions for medical costs, but some specifically covered that directly relate to addiction treatment, such as a hospital stay, x-ray, or ambulance rides, among several other diagnostic, evaluative, and treatment services meet the IRS determination for tax-deductible medical costs.
It is important to speak to a tax professional about specific questions you may have about your individual situation.
Does The IRS Include Drug Rehab In Qualifying Medical Costs?
The IRS definitely considers substance abuse treatment a medical cost. This means that any medical cost, including drug rehab, that you incur that totals more than 7.5 percent of your annual gross income can be deducted on an itemized Schedule A form on your yearly taxes.
Remember, if you pay a health insurance premium, that monthly payment can be added to your medical costs totals for tax deductions. Just because you have health insurance, does not mean you cannot deduct your out-of-pocket medical expenses on your taxes.
Drug rehab is a qualifying tax-deductible medical cost, as long as medical costs exceed 7.5 percent of your annual gross income. This means all medical costs, not just the cost of rehab.
Paying For Substance Abuse Treatment
There are many financial options to help someone pay for the cost of treatment, some are tax-free (health savings accounts, health reimbursement arrangements, or a flexible spending account) that can help you reach the 7.5 percent you are responsible for.
It is important to talk to a financial professional regarding your finances and how you can pay for treatment. There are many options to help you get the treatment you need without taking everything you have.
Our treatment specialists are available to assist you in starting your recovery journey. Please reach out to us today. We can help verify benefits and find a facility that meets your needs.
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