Can I Write Off Therapy as a Medical Expense on My Taxes?

The Internal Revenue Service (IRS) allows deductions for certain medical costs, and under specific circumstances, therapy expenses may qualify. It is important to understand that not all therapy costs will be eligible, and strict rules apply to claiming such deductions.

General Requirements for Medical Expense Deductions

To deduct medical expenses, including therapy, taxpayers must itemize their deductions rather than taking the standard deduction. Itemizing involves listing specific qualifying expenses on Schedule A (Form 1040) of your tax return.

For many taxpayers, the standard deduction provides a greater tax benefit. This makes itemizing medical expenses less common unless they have significant out-of-pocket costs.

Only the amount of unreimbursed medical and dental expenses exceeding 7.5% of your Adjusted Gross Income (AGI) is deductible. For instance, if your AGI is $50,000, you can only deduct the portion of medical expenses that surpasses $3,750.

This means that a substantial amount of medical spending is typically required before any deduction becomes available.

The deduction can be claimed for medical expenses paid for yourself, your spouse, and your dependents. This threshold often makes it challenging to claim the deduction unless an individual experiences substantial medical costs during the year. The IRS provides detailed guidance on what constitutes a qualified medical expense in Publication 502.

Specific Qualifying Therapy Expenses

The IRS defines medical care as amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. This definition is central to determining whether therapy expenses are deductible. Therapy for diagnosed mental health conditions generally falls within this scope.

Fees paid to licensed mental health professionals such as psychiatrists, psychologists, and licensed therapists are typically eligible if the therapy addresses a diagnosed mental illness. This includes treatment for conditions like depression, anxiety, post-traumatic stress disorder, bipolar disorder, and substance use disorders.

The therapy must be for a specific medical condition, not for general well-being or personal growth.

For example, therapy aimed at treating a diagnosed mental illness is a qualified medical expense. However, therapy sought for general emotional support, stress reduction without a diagnosed condition, or relationship counseling, such as marital counseling, usually does not qualify for a deduction.

The distinction lies in whether the service is primarily for the alleviation or prevention of a physical or mental defect or illness.

Certain related costs can also be included if they are integral to the medical care. This may include prescribed medications for mental health conditions, provided they are part of a treatment plan.

Transportation costs to and from therapy appointments can also be considered medical expenses, as long as the travel is primarily for and essential to receiving medical care.

How to Claim Your Deduction

Accurate and meticulous record-keeping is paramount when planning to deduct medical expenses. Taxpayers should retain all receipts, invoices, and statements that document the medical services received, the amount paid, and the date of payment.

This documentation is crucial to substantiate your claims in the event of an IRS inquiry or audit.

To calculate your deduction, you will need to aggregate all qualifying unreimbursed medical expenses for the tax year. This total is then compared to 7.5% of your Adjusted Gross Income (AGI).

The amount of expenses that exceeds this AGI threshold is the deductible portion. For example, if your AGI is $60,000 and your qualifying medical expenses total $7,000, the first $4,500 (7.5% of $60,000) is not deductible, leaving $2,500 that can be claimed.

The deductible amount of medical expenses is reported on Schedule A (Form 1040), which is used for itemized deductions. You will enter your total medical and dental expenses on the appropriate line, and the form guides you through the calculation to determine your deductible amount after applying the AGI limitation.

Schedule A is then attached to your Form 1040 when you file your income tax return.

Before deciding to itemize, it is beneficial to compare your total itemized deductions (including medical expenses, state and local taxes, mortgage interest, and charitable contributions) against the standard deduction amount for your filing status.

You should only itemize if your total itemized deductions exceed the standard deduction, as this will result in a greater tax benefit.