OK, let’s be real. You’re not likely to make a decision to have a baby based solely on how tax deductible a newborn would be. But did you know there are medical expense deductions you may be able to take whether you choose to have a baby -- or not?
Before we reveal them, let’s look at how the IRS determines deductibility. The IRS allows you to deduct medical and dental expenses that exceed 10% of your adjusted gross income (7.5% of AGI if you are 65 or older, in which case it’s unlikely you’d be thinking about having a baby but may have other medical expenses). You can claim those expenses when you itemize deductions, using Schedule A.
Medical expenses include, but are not limited to, payments for legal medical services rendered by physicians and other medical practitioners. They can also include the costs of equipment, supplies and diagnostic devices needed for these purposes.
So, let’s say you did have a baby in 2014 or you’re thinking about having a baby this year, what are some of things the IRS considers deductible medical expenses?
- Breast Pumps and Supplies. You can include the cost of breast pumps and supplies that assist lactation (such as nursing bras). Some estimates put these costs at $1,000 or more for a nursing mom.
- Fertility Enhancement. You can include the cost of certain procedures to overcome an inability to have a baby, such as in vitro fertilization.
- Hospital Services. Your medical expenses may include the cost of delivering your baby at a hospital or similar institution if the principal reason for being there is to receive medical care.
- Medicines. Occasionally expectant mothers must take certain medications during pregnancy, especially if they are diabetic. You can include only those amounts you paid for prescribed medicines and drugs.
- Pregnancy Test Kit. You can include the amount you pay to buy a pregnancy test kit to determine if you are pregnant.
If you claim these medical expenses with your other health care spending, your total out-of-pocket costs could put you over the 10% threshold. But before you get carried away with baby-making deductions idea, let’s talk about what is NOT deductible.
Babysitting, childcare and nursing services for a normal healthy baby cannot be treated as an expense paid for medical care. However, the IRS does allow some tax relief to parents, including the earned income credit and the child tax credit.
You also cannot include diaper service as a medical expense unless it is needed to relieve the effects of a particular disease. Maternity clothes are also not deductible, and neither is household help, even if such help is recommended by a doctor.
If you did NOT have a baby in 2014 and don’t see childbearing in your future, there are still allowable tax deductions you can include with your other medical expenses. See IRS Publication 502, Medical and Dental Expenses.
Whether you choose to have a baby or not, gather your receipts and talk with a tax adviser about medical expense deductions. The professionals at a tax preparation service can help you navigate the intricacies of the tax system.
By Denise Bridges