One of the changes made by the IRS with the national standards of allowable expenses is that the IRS has added a new category specifically for out of pocket health care expenses. While I have not had an opportunity to look into the specifics of this new standard yet, it already causes some worry because I am nervous that the IRS is going to be limiting a valid expense that many taxpayers have each month.
Out of pocket health care expenses are an expense that I generally tell my clients the IRS will allow 100% of if they can prove they are making payments. Now, of course, the IRS is not going to allow you a monthly expense for the $200,000 you owe the hospital for that open-heart surgery you had performed without insurance, unless you can prove you are making monthly payments to the hospital. That is the key – making those monthly payments. However, now, when you pay the hospital the IRS gives you 100% credit for those payments. Whereas, if you were making a huge mortgage payment each month, the IRS will only allow the national standard expense which can be significantly lower than a mortgage payment.
My cause for concern is that the IRS is going to eliminate a valid expense each month that will force my clients to not have prescriptions filled or to cancel health insuranec policies to be able to afford IRS payment plans. Now, since I haven’t reviewed the new standard in detail yet, that may not be the case, but it was definitely a scare when I looked through the press release. More information to come on this topic.
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