A client recently received an audit letter. The IRS apparently did not like the fact that they were able to deduct medical expenses.
Now the letter stated that they were also looking into their charitable deduction and mortgage interest. But the IRS receives copies of the 1098 just like the client for the interest deduction and the charitable donations this year were light at $55 off of a K-1.
So they were really only looking at the Medical deductions. The number was large, they had paid $25,000+ for medical insurance that year and neither was covered by an employer plan. So that was cash out of their pockets.
I have seen quite a few clients hitting this level, without the benefit of employer contributions.
Then for the client there were the co-pays, the prescriptions, doctor, dentists, chiropractors, optometrist and other medical expenses that were deducted.
With no ceilings on the increases or any cost containment provisions for the ACA, more and more people will be allowed to deduct medical expenses.
Assuming that Congress continues to allows the deductions. There is talk with tax reform to remove its deductibility.
How soon till you are capable of getting audited for your medical costs? Our medical insurance currently comes out on a before tax basis.