Tax Deduction for Homebirth???

[MamaAllNatural]

Hi, I'm asking this question for my sister. She is in Idaho and is under the impression that she can use the expenses she paid for her homebirth as a tax write off. She said that they are allowed to use doctor copays, prescription copays etc. as tax deductions. So, can she really do this? I told her I'd find out for sure for her here. I'd especially like to hear from Idaho mamas and mamas who know about taxes. Thank you.

[Kathryn]

If it's a medical expense, she can use it. BUT, it has to be over a certain amount. I think it's like 2% of your income or something like that. If you wanted to write off cough drops you could because it's medical.

[wednesday]

You can deduct from your taxable income any medical expenses that exceed 7.5% of your total income. Allowed expenses are health insurance premiums, physician co-pays, prescription drugs, and a whole long list of other things...prosthetics, etc. I don't believe over-the-counter medicines like cough drops are allowed, though.

Here's an example of how it would work. Say your income for the year was $40,000. Say your health insurance premiums are $300/month for a total of $3600 per year. And let's say you had a bunch of physician co-pays and prescription co-pays that added up to $400. So your total medical expenses for the year were $4000, or 10% of your total income. You can't deduct the entire $4000, but you can deduct the part of it that exceeds 7.5% of your income. If my math is correct, that means you could deduct $1000 from your taxable income for the year under the medical expenses deduction.

Hope that helps! The way I read the IRS guidelines on this, you can even deduct your mileage expenses for traveling to and from medical appointments...I just don't seem to be organized enough to keep track of all that, though. If you didn't keep good records throughout the year of your doctor visits and prescription purchases, many pharmacies and doctor's offices will print out a statement of all payments you made during the year if you just ask. It may add up to more than you think. I know for us this year our medical expenses easily exceeded 10% of our gross income--and we didn't even have anything major like a birth or surgery or ER visit.

[wednesday]

This link goes into more detail about what kinds of medical expenses you can deduct:

http://www.irs.gov/taxtopics/tc502.html

They don't mention homebirth specifically, but I'm sure the expenses of a hospital birth would be deductible. I would think homebirth would be included under "nursing services" if the attending person is a CNM. Probably helps if the midwife includes supplies and such in a global bill instead of having the client purchase those independently.

[Debstmomy]

This is just another aspect, but tax related. If you have a flexable spending account for healthcare, check in to see if you can use that to pay for your homebirth. This money is taken out before taxes on your pay check, thus less income for that tax year. (In addition to the tax deduction that is born too!) They may also work for LC services, Doula services as well.

[kathma26]

It is 7.5%. You can include things like milage and how much you pay for dental and medical insurance. Here is a link of what you can deduct.

http://www.irs.gov/publications/p502/index.html

Kathy who missed it by $798

[MamaAllNatural]

Thank you so much for all of the info. I've passed it all on to my sister.

[orangebird]

We spend enough on medical expenses every year that we are able to deduct it, I wonder though, my midwife not being licenced or certified in my state if she would count, YK? She has a licence in a different state, but not the one I live in.

Dang it I forgot to write off my homebirth last time, my midwife for that birth is a licenced ND in my state so I'm sure she would count. I can't remember if I itemized that year. I should amend them.

But anyway, what about a midwife who is a "lay" midwife and not legal in your state? How would you find out about that? I'm going to check that link right now.

[orangebird]

Dang, I already did my taxes this year and forgot my accupuncturist. I don't want to amend them, think $400 would make a difference worth the hassle? Hmmm...

OK, it doesn't say anything about my midwife, but if you can deduct for a Christian Science Practicioner then I would think a lay midwife should be covered.

[LoveChild421]

I live in GA where lay midwives (even CPMs) are "illegal" so I'm guessing I can't deduct my CPM? Anyone tried this?

[Full Heart]

Well if its federal I don't think it matters does it? I don't think the IRS is gonna be checking to see if midwifery is legal in your state. Wel you never know, lol, but I doubt they would.

We never spend enough a year to deduct anything for medical. The ratio is always off.

Michelle

[applejuice]

Full-Heart, that is a good thing...being healthy...nothing beats it...and you certainly cannot buy it.

[wednesday]

Originally Posted by Full Heart

We never spend enough a year to deduct anything for medical. The ratio is always off.

Our health insurance premiums ALONE were over 10% of my gross salary for this year, fwiw...never mind co-pays and deductibles and so on. Are you sure you're counting those deductions from your paychecks when you look at your medical expenses for the year?

[Full Heart]

We're self employed. We don't have health insurance. When we did it was $300 a mos plus all of our other expenses dh was still making too much. Now we barely made anything last year and still we only went to the dr like 4 times. So always under.

Michelle

[Electra375]

I won't be concerned of the licensed or not licensed issue, that is an insurance issue not a tax issue. It is a billable medical expense regardless of whether the midwife is legal or not.

The biggest issue is that it is really hard to meet the $$ requirements. Remember that insurance premiums taken out of your income before taxes are not elidgible for a medical deduction.

Medical expenses over 7.5% of AGI (adjusted gross income):
Example: AGI is 50,000, you can deduct expensive over $3750 (50,000*7.5%).
My homebirth was $2200 plus about $100 in supplies. I can't go near 3750 in medical expenses b/c we don't see doctors or use prescription drugs that often. And remember it's expenses over this amount, so I'm hosed. MY dh's insurance premiums are taken out of his pay before taxes, therefore they do not qualify.

And then even if you have medical expenses, you may not benefit from itemizing verses using the standard deduction. Never itemize if you can't go over the standard deduction -- and I have seen people do this!!!

I suspect there are a couple of accountants or tax preparers here besides me or either a super tax savy mother!

Happy Tax Season!!!

[wednesday]

Originally Posted by Electra375

And then even if you have medical expenses, you may not benefit from itemizing verses using the standard deduction. Never itemize if you can't go over the standard deduction -- and I have seen people do this!!!

I know, that was such a huge surprise to me when I bought my first home. I was single and it was very, ahem, modest (okay, it was a dump). But all these people told me I was going to get like a quarter of my mortgage payments back at tax time. Color me aggravated when I did my taxes the following spring and the mortgage interest deduction amounted to diddly-squat compared to the standard exemption anyway. Turns out you have to have borrowed a lot of money in the first place for the mortgage interest deduction to be any help!

And this year, we have high medical expenses, but we no longer own a home...we still may be under the standard exemption. It seems like there are a lot of tax breaks once you hit a certain level of middle-class...and there are things like EIC if you are really broke...but in between you just pay one way or another.

[pajara2]

Originally Posted by Electra375

I won't be concerned of the licensed or not licensed issue, that is an insurance issue not a tax issue. It is a billable medical expense regardless of whether the midwife is legal or not.

The biggest issue is that it is really hard to meet the $$ requirements. Remember that insurance premiums taken out of your income before taxes are not elidgible for a medical deduction.

Medical expenses over 7.5% of AGI (adjusted gross income):
Example: AGI is 50,000, you can deduct expensive over $3750 (50,000*7.5%).
My homebirth was $2200 plus about $100 in supplies. I can't go near 3750 in medical expenses b/c we don't see doctors or use prescription drugs that often. And remember it's expenses over this amount, so I'm hosed. MY dh's insurance premiums are taken out of his pay before taxes, therefore they do not qualify.

And then even if you have medical expenses, you may not benefit from itemizing verses using the standard deduction. Never itemize if you can't go over the standard deduction -- and I have seen people do this!!!

I suspect there are a couple of accountants or tax preparers here besides me or either a super tax savy mother!

Happy Tax Season!!!

Ummm HI that would be me.... I love tax season...

You summed it up correctly. No insurance premium if it's already pre-tax, nothing unless it's over 7.5% of AGI, and don't itemize if it doesn't exceed the standard deduction. (You're kiding me...someone you know's done this...so sorry.)

Also note though...starting this year, if you live in a state that doesn't have a state income tax you can instead take a pre-calculated amount of sales tax (including for any major purchases like a car, boat, motorcycle, rv, etc) on your itemized deductions.

What I wanted to say here however is this...If your employer offers a medical expense account option TAKE IT INSTEAD!!!!! This is where your employer withholds an amount you determine from your check PRE-TAXES that you then use to reimburse yourself for medical expenses. NO 7.5% threshhold. So even if you can itemize your deductions, even if you exceed 7.5% of your AGI in medical expenses, it's better to use the medical expense account because you don't get hit with the 7.5% instant reduction.

Oh and I know alot of OTC meds are now deductable like robitussin, aspirin, HPT, OPK, pre-natal vitamins (not regular vits though), so I wouldn't be surprised if cough drops aren't too. LOL

Just your friendly neighborhood tax geek mom....