The IRS released an updated version of Publication 502- Medical and Dental Expenses- that should be used for filing 2020 tax returns. Publication 502 explains the itemized deduction for medical and dental expenses that may be claimed on Schedule A of Form 1040. It addresses what expenses, and whose expenses, a taxpayer can and cannot include in figuring the medical expense deduction.
Publication 502 includes a definition of “medical expenses.” Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body. The publication includes a list of expenses and identifies if the expenses are medical or not.
Many employers use Publication 502 as a reference for what expenses are eligible to be reimbursed from a health flexible spending account plan, since a health FSA may reimburse medical expenses, only. While Publication 502 is a very useful tool for health FSA administration, employers and participants must be cautious on relying too heavily on the Publication. Some items in Publication 502 are medical for tax deduction purposes but are not eligible for reimbursement from a health FSA. For example, the Publication identifies insurance premiums as medical expenses, but insurance premiums are not eligible for reimbursement from a health FSA.
For a copy of Publication 502 applicable to 2020 tax filings, click here.