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.
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