Tax Time! Can Your Clients Deduct Your Patient Advocacy Services?

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thad(With apologies to Canadian advocates – this post is targeted to taxpayers in the United States.)

This question pops up about this time each year – whether or not patient advocacy services are a ‘qualified medical expense’ in the eyes of the IRS;  whether or not your clients can deduct your bills in order to reduce their tax liabilities.

Keeping in mind that I am not an IRS representative, nor am I a CPA or tax preparer, I still say – go for it – at least for many of the services we advocates provide.  Why not try?

Hear me out, because this statement comes from several years of trying to sort it out without being able to get a ruling from the IRS.

Why no ruling?  Because, as we learned in 2010, in order to get a ruling, the deduction must be legally tested.  That can only happen if someone actually deducts the cost of an advocate, is then audited by the IRS, is questioned during the audit about taking the deduction, and then has to defend the deduction.

That means we advocates can’t figure it out unless one of us actually tries to take a deduction for hiring another one of us.  I don’t see that happening.

No – this will fall on the shoulders of a client who decides to take the plunge.  It could be a decade before it happens, if ever!  And in the interim, all those folks who could have enjoyed the lower tax bill will have missed out.

So as I said – for many of the services we provide (see which ones below), why not give it a try? 

For 2012 taxes, IRS topic 502 addresses Medical and Dental Expenses.  Their definition:

Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.

They then provide a list of qualified expenses and non-qualified expenses. Advocates are no where to be seen on either list, but (again, as we learned in 2010) there are some other expenses that are either very parallel, or could be applied exactly the same way, as follows:

  • A Guide Dog: This (seriously) is the closest description in all of the IRS materials to the work advocates do.  Guide dogs are qualified expenses.
  • Christian Science Practitioners:  This qualified expense was suggested to me as a parallel, too.  I’m not sure it is, because Christian Science as an organized religion is recognized by the government, and patient advocates are not recognized in the same way.  Even still – it could be used as an argument in some ways, I’m sure.
  • Health Club Dues:  These dues are NOT considered qualified expenses. But I make the point here because the explanation says they are not deductible because they are not “amounts paid to improve one’s general health or to relieve physical or mental discomfort not related to a particular medical condition.”  That indicates to me that expenses which address the amounts paid with the intention of relieving physical or mental discomfort DO qualify.

Regarding the “right” services:

Based on this information, not all advocacy services would qualify as being deductible.  If you work in medical-navigational advocacy, helping individuals through their journeys with sickness or injury, then yes, they probably would.  But if you work in another aspect of advocacy, such as billing and claims, or family mediation, then probably not.  Again – remember these are my opinions ONLY. I am not at all qualified to give you a real answer!

Do you know of someone who has deducted the expense of hiring you to help? You would be doing all of us a service if you helped us better understand their experience. I know of no test cases so far – but would be happy to house any information we can find on the topic.

It’s one more piece of the puzzle of building a new profession.  Once again, our pioneer spirit is alive and thriving! But it’s also a reminder that we all just making it up as we go along.

(Photo: Thad, the service dog in the photo above, belongs to one of our APHA member advocates. Learn more about Thad.)

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Comments

  1. R. Ruth  March 31, 2014

    Hello Trisha,

    Thank you for this excellent post. If I may add a friendly footnote, we advocates might even consider annotating our invoices in such a way that would enable clients (to try) to deduct advocacy charges should they wish to do so. Thus, specificity about both the condition being addressed and the actual service provided, including location where services were delivered, would be essential. I can imagine someone more industrious than I even developing a billing code book!

    Your post also made me wonder whether clients have tried to reimburse themselves for advocacy services through their HSAs. Obviously, allowable expenses differ between HSAs and tax returns. Thoughts?

    reply
    • Trisha Torrey  April 1, 2014

      Ruth – EXCELLENT idea about annotating invoices.

      I haven’t yet heard of anyone trying to reimburse themselves through their HSA (health savings account) but I would think the same guidelines would be applied as are used for the IRS qualified medical expenses. In face, until and unless the deduction is tested, I would think they would have some trouble getting reimbursed.

      I’d love to hear from anyone who has tried this…

      Trisha

      reply
  2. Martine B  March 31, 2014

    According to the IRS, and confirmed by 2 tax persons, if a medical practitioner prescribes (in writing or with an order in the chart) a specific item for a medical diagnosis, such as a program to lose weight, a tai chi class for stress management, or acupuncture to ease side effects from chemotherapy then it is tax deductible. If you get a gym membership because your doc advised you to but did not specifically prescribed it, then it is not deductible.
    For more info: http://www.irs.gov/taxtopics/tc502.html

    As far as patient advocates, services are not deductible as no clinical or medical services are prescribed or rendered. If such services are rendered, i.e nursing care at home or help at home, then these services fall under home health or nursing care, and are then labelled and regulated accordingly. They would be deductible in many cases.

    Patient advocates fall usually under the label of “consultant” or “professional services” such as attorneys or tax preparers. Those services are tax deductible to some extend, however the )(friends) tax preparers I consulted with last year on behalf of a client could not find any direct reference with the IRS. The client decided not to deduct.

    reply
    • Trisha Torrey  April 1, 2014

      Martine,

      Agreed on your first paragraph – however – if you read my post (above) – I have to respectfully disagree on your second and third paragraphs. Some advocacy services, those that are medical/navigational in nature, may well be deductible, but we won’t know that until they are tested. (I should probably reiterate that we’re not talking about advocacy services such as medical bill reviews or choosing the right health insurance. Those are financial in nature, less so health or medical.)

      There are many “qualified medical expenses” that aren’t so much medical as they are assistive, and that includes guide dogs. No one is getting medical advice or treatment from one of these wonderful dogs – but they are definitely a qualified medical expense according to the IRS. And, after several hours walking it through with an IRS agent, he felt we would have a good shot at getting medical navigational-type services added to the list of qualified expenses.

      The real key here is that services cannot be added to the list of qualifieds until and unless they are tested through an audit. So until someone deducts an advocate’s services, then has to defend that deduction through an audit, we won’t know what the IRS really thinks.

      We can’t make the call – only the IRS can.

      Trisha

      reply
  3. Rae  April 2, 2014

    I sent the article to my accountant, who said “there never was a question”. In his opinion, the services of a patient advocate should definitely be tax deductible.

    Rae

    reply

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