Can You Write Off Counseling on Your Taxes?

Certain counseling expenses may be deductible on your tax return, provided specific criteria are met for them to qualify as medical expenses. The Internal Revenue Service (IRS) provides guidelines for which health-related expenses can be included when calculating potential deductions. Understanding these rules helps taxpayers reduce their taxable income through medical expense claims.

What Qualifies as a Medical Expense

The Internal Revenue Service (IRS) defines medical expenses as costs 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 broad definition includes various services, but for counseling to be deductible, it must directly relate to a medical condition. Fees paid to licensed medical professionals, such as psychiatrists, psychologists, and other mental health practitioners, for treating a diagnosed mental illness are eligible. Therapy for conditions like depression, anxiety, post-traumatic stress disorder, or substance use disorder can qualify.

Counseling services must be primarily for the alleviation or prevention of a physical or mental defect or illness. This means that counseling for general well-being, personal growth, or relationship issues not stemming from a diagnosed medical condition does not qualify as a deductible medical expense. Marital counseling is not deductible unless it is part of a treatment plan for a diagnosed mental illness affecting one of the spouses. Expenses for general health improvement programs are not deductible.

Only unreimbursed medical expenses are considered for deduction. This means any amounts paid by insurance, a health savings account (HSA), or a flexible spending arrangement (FSA) cannot be included in your deductible expenses, as these funds are already tax-advantaged. Additionally, the services must be provided by a recognized medical professional. This includes fees to doctors, dentists, surgeons, chiropractors, psychiatrists, and psychologists.

Deducting Medical Expenses

Medical expenses, including qualifying counseling costs, are claimed as an itemized deduction on Schedule A. Taxpayers must choose between taking the standard deduction or itemizing their deductions; medical expenses can only be deducted if itemizing results in a greater total deduction. The decision to itemize depends on whether your total itemized deductions, which can include state and local taxes, home mortgage interest, and charitable contributions, exceed the standard deduction amount for your filing status.

A specific Adjusted Gross Income (AGI) threshold applies to medical expense deductions. Taxpayers can only deduct the amount of qualified medical expenses that exceeds 7.5% of their AGI. For instance, if your AGI is $50,000, you can only deduct the portion of your medical expenses that is above $3,750 ($50,000 x 0.075). If your total qualifying medical expenses for the year were $6,000, you would be able to deduct $2,250 ($6,000 – $3,750).

This threshold means a significant amount of out-of-pocket medical expenses must be incurred before any tax benefit is realized. The 7.5% AGI threshold has been made permanent for most tax years. Your AGI is your total income subject to tax, reduced by certain adjustments, such as contributions to a traditional IRA. The calculation for the deductible amount is performed on Schedule A.

Record Keeping and Reporting

Maintaining accurate and thorough records is essential when claiming medical expense deductions. You should keep receipts, invoices, and statements for all payments made for counseling and other medical services. These documents should clearly show the date of service, the amount paid, and the nature of the service received. While you do not send these records with your tax return, you must retain them to substantiate your claims if the IRS requests verification.

For counseling expenses, it is beneficial to have documentation that supports the medical necessity of the treatment. This might include a diagnosis from a medical professional or a referral for counseling services for a specific condition. Such documentation helps demonstrate that the counseling was for the diagnosis, treatment, or mitigation of a disease, aligning with IRS definitions.

All qualifying medical and dental expenses for the year are totaled and reported on Schedule A. This form has a specific line dedicated to medical and dental expenses. After calculating the amount exceeding the 7.5% AGI threshold, this deductible portion is entered on Schedule A, contributing to your overall itemized deductions.