New Tax Break for Weight-loss Programs

The IRS recently ruled that the cost of a weight-loss program to treat obesity or another medical condition (e.g., hypertension) diagnosed by a doctor may be deductible on an individual income-tax return as a medical expense.

The ruling described one type of weight-loss program that qualifies for the deduction: a program in which participants receive diet menus, plan their diets, and talk about problems associated with their diets. The cost to join such a program and attend regular meetings is potentially deductible. However, the cost of low-calorie diet food is not deductible because it is merely a substitute for food the individual would normally eat. The ruling does not say whether the cost of a health-club membership or exercise program for weight loss as treatment for a diagnosed medical condition is deductible.

Individuals who participate in their employers' medical flexible spending account programs may now seek reimbursement for the cost of participating in qualified weight-loss programs. Individuals who are not reimbursed for their medical costs may deduct as an itemized expense the amount of their total unreimbursed medical expenses that exceeds 7.5% of their adjusted gross income.

Example:  Sam's doctor diagnosed Sam's high cholesterol and recommended that Sam lose weight to treat the high cholesterol condition. Sam participated in a weight-loss program that cost $1,500 and was not reimbursed for this medical expense. His other unreimbursed medical expenses for the year totaled $2,000. Sam's adjusted gross income was $40,000. Of the amounts Sam spent on the weight-loss program and other expenses, he may deduct $500 ($3,500 - $3,000, which is 7.5% of $40,000).

To help substantiate eligibility for the deduction, an individual may want to obtain a doctor's written diagnosis of his or her medical condition and the doctor's recommendation of a weight-loss program as treatment for the condition. The new ruling is effective immediately and applies to tax years past, present, and future. Individual income-tax returns for 1999, 2000, and 2001 may be amended in order to receive tax refunds for costs incurred for weight-loss programs in those years.

The information provided in the newsletter has been obtained from sources believed to be reliable but its accuracy is not guaranteed.