(Updated March 2021)
It’s income tax season in the United States. Some of us have already filed our income taxes. Some have piled up those 1099s and W-2s and are mustering up the courage to make an appointment with our tax preparers. And others are saying, “Please don’t remind me!”
But let’s not forget – it’s tax season for our clients, too, many of whom have accumulated enough medical expenses that they may be asking whether or not they can deduct your health or patient advocacy, navigation or medical billing review services from their taxes.
Good question, right? Have you ever thought of yourself as someone else’s tax deduction? (Well – OK – your parents took deductions for you, but….) That’s what we need to know….
Are patient or health advocates’ or care managers’ services deductible from income taxes?
The answer is – maybe, and maybe not. For 2011 taxes (filed in 2012) there is no real answer, but there are definite possibilities. (Update 2021 – still no answers! But the same possibilities.)
We first asked this question in November 2010 – and at that time I spent a few hours (seriously!) on the phone with an IRS agent to uncover the best answer to this question. And his best answer was just what I said above: there is no answer – yet.
The IRS produces a publication which outlines medical deductions, called Publication 502. There is a specific list of medical expenses that are deductible, and there are call-outs of expenses that are not deductible. Patient or health advocacy is missing on both lists.
That said, there is a definition of medical expenses, as follows:
Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes.
Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.
If the work you do on behalf of your clients fits that definition, then it seems like there should be no problem if your client deducts what they paid you as long as they follow the other requirements (the 7.5% or 10% threshold, etc.), right?
So far as we know, no one has ever been tested on this deduction. It’s probable that clients have deducted the services of their advocates, perhaps even with the blessings of a tax expert or CPA. But so far as we know, no one has been audited and had to prove that their advocate actually qualified as a bona fide medical expense. (If you know of someone who has, will you contact me please> info(at)advoconnection.com)
In my conversation with the IRS agent, we went through some of the listed possibilities. Even for those advocates who are nurses, their work as advocates does not qualify under “Nursing Services” because they are not doing hands-on work with their patients. Some non-nursing services provided to chronically ill patients, or elderly patients, may be more defined, but nothing spells out “advocate, care manager, or navigator.” As the agent and I discussed the possibilities, we finally determined that among all the possible medical deductions, patient advocacy services are most similarly described like the services of guide dogs!
Here’s the bottom line – what we can tell clients, and the choices they have:
In order to ever put patient or health advocates or navigators on the list of IRS qualified medical expenses, taxpayers are going to have to take the deduction in order to test the deduction. If they take it and it is not questioned – great. If they take it, and they are audited and have to prove that it fits the parameters – even better for advocates and navigators (perhaps not so great for them – but perhaps no problem either.)
Am I telling you to tell your clients to deduct your services from their taxes? No. I am not a tax expert and can’t give that kind of advice. However – if enough of our clients do choose to take the deduction, then someday we will, at least, have an answer to the question of whether or not our patient advocacy services are a qualified medical expense, and therefore an acceptable medical deduction.
You can read more about my conversation with the IRS agent here.
You can find the IRS Publication 502 here.