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A Taxpayer's Guide on IRS Policy to Deduct Weight Control Treatment

On April 2, 2002, the Internal Revenue Service (IRS) announced a change in its policy regarding how taxpayers may deduct the costs of weight loss / weight control programs.

The following are interpretations of the American Obesity Association regarding the IRS policy. We want to emphasize that this is our interpretation; not an official interpretation. Consult your professional tax advisor on how this new policy effects your specific tax situation.

What has changed?

The IRS set out a new policy in a Revenue Ruling (2002-19) on April 2, 2002.

New Policy: In Revenue Ruling 2002-19, the IRS stated that, "Obesity is medically accepted to be a disease in its own right." The IRS ruled that, "Uncompensated amounts paid by individuals for participation in a weight-loss program as treatment for a specific disease or diseases (including obesity) diagnosed by a physician are expenses for medical care that are deductible under § 213, subject to the limitations of that section."

Who is eligible for the deduction?

There are three categories of persons who may be eligible. First, taxpayers who itemize their deductions can add these costs to the costs of medical and dental expenses. Within this category, taxpayers can only deduct medical and dental expenses that exceed 7.5% of their adjusted gross income and that are not reimbursed.

Second, many employees have medical savings accounts (MSAs) through their employers. MSAs use the same definitions of medical expenses, as do individual taxpayers. Therefore, employees can use their MSAs for weight loss programs if undertaken at a physician’s direction to treat an existing disease.

Third, many employers provide Flexible Savings Accounts (FSAs) that may provide this coverage. FSAs, also, use the same definitions of medical expenses, as do individual taxpayers

Revenue Ruling 2002-19 gives examples of two taxpayers participating in weight-loss programs. They paid fees to join the programs and to attend periodic meetings and purchased diet plans and booklets. One was diagnosed by a doctor as obese, the other as suffering from hypertension. Both participated in the programs as a treatment for their diseases. The costs related to their weight-loss programs would be deductible for these taxpayers, to the extent not reimbursed by insurance or otherwise.

Taxpayers may deduct qualifying medical expenses only to the extent the total of such expenses exceeds 7.5 percent of their adjusted gross income.

The ruling distinguishes these cases from situations in which taxpayers participate in weight-loss programs to improve their general health or appearances. Such costs are nondeductible personal expenses.

Although diet foods may also be part of a weight-loss program, these are substitutes for the food the taxpayers normally consume and satisfy their nutritional requirements. As such, they are not deductible medical expenses, even for taxpayers whose disease qualifies them to deduct weight loss program costs.

This guidance applies not only to the 2001 tax returns being filed this year, but also to any years for which taxpayers may file amended returns. Generally, a person may amend a return for three years after the due date. Thus, a taxpayer who did not have an extension to file would have until April 15, 2002, to amend a 1998 return.

Rev. Rul. 2002-19 will be available soon on the IRS Web site at www.irs.gov. It will be published in Internal Revenue Bulletin 2002-16, dated April 22, 2002

     

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