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Military H&r Block

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Military H&r Block

Military h&r block Publication 502 - Main Content Table of Contents What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Military h&r block How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Spouse Dependent Decedent What Medical Expenses Are Includible?Abortion Acupuncture Alcoholism Ambulance Annual Physical Examination Artificial Limb Artificial Teeth Bandages Birth Control Pills Body Scan Braille Books and Magazines Breast Pumps and Supplies Breast Reconstruction Surgery Capital Expenses Car Chiropractor Christian Science Practitioner Contact Lenses Crutches Dental Treatment Diagnostic Devices Disabled Dependent Care Expenses Drug Addiction Drugs Eye Exam Eyeglasses Eye Surgery Fertility Enhancement Founder's Fee Guide Dog or Other Service Animal Health Institute Health Maintenance Organization (HMO) Hearing Aids Home Care Home Improvements Hospital Services Insurance Premiums Intellectually and Developmentally Disabled, Special Home for Laboratory Fees Lactation Expenses Lead-Based Paint Removal Learning Disability Legal Fees Lifetime Care—Advance Payments Lodging Long-Term Care Meals Medical Conferences Medical Information Plan Medicines Nursing Home Nursing Services Operations Optometrist Organ Donors Osteopath Oxygen Physical Examination Pregnancy Test Kit Prosthesis Psychiatric Care Psychoanalysis Psychologist Special Education Sterilization Stop-Smoking Programs Surgery Telephone Television Therapy Transplants Transportation Trips Tuition Vasectomy Vision Correction Surgery Weight-Loss Program Wheelchair Wig X-ray What Expenses Are Not Includible?Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Controlled Substances Cosmetic Surgery Dancing Lessons Diaper Service Electrolysis or Hair Removal Flexible Spending Account Funeral Expenses Future Medical Care Hair Transplant Health Club Dues Health Coverage Tax Credit Health Savings Accounts Household Help Illegal Operations and Treatments Insurance Premiums Maternity Clothes Medical Savings Account (MSA) Medicines and Drugs From Other Countries Nonprescription Drugs and Medicines Nutritional Supplements Personal Use Items Swimming Lessons Teeth Whitening Veterinary Fees Weight-Loss Program How Do You Treat Reimbursements?Insurance Reimbursement How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Sale of Medical Equipment or Property Damages for Personal Injuries Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons COBRA Premium Assistance Health Coverage Tax CreditWho Can Take This Credit? Qualifying Family Member Qualified Health Insurance Nonqualified Health Insurance Eligible Coverage Month How To Take the Credit How To Get Tax HelpLow Income Taxpayer Clinics What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Military h&r block These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Military h&r block They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Military h&r block Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Military h&r block They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Military h&r block Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Military h&r block Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Military h&r block What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Military h&r block (But see Decedent under Whose Medical Expenses Can You Include, for an exception. Military h&r block ) If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Military h&r block If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Military h&r block If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Military h&r block If you did not claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040X, Amended U. Military h&r block S. Military h&r block Individual Income Tax Return, for the year in which you overlooked the expense. Military h&r block Do not claim the expense on this year's return. Military h&r block Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Military h&r block You cannot include medical expenses that were paid by insurance companies or other sources. Military h&r block This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services. Military h&r block Separate returns. Military h&r block   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Military h&r block Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Military h&r block Community property states. Military h&r block   If you and your spouse live in a community property state and file separate returns or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Military h&r block Generally, each of you should include half the expenses. Military h&r block If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Military h&r block If you live in a community property state and are not filing a joint return, see Publication 555, Community Property. Military h&r block How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI. Military h&r block But if either you or your spouse was born before January 2, 1949, you can deduct the amount of your medical and dental expenses that is more than 7. Military h&r block 5% of your AGI. Military h&r block Example. Military h&r block You are unmarried and were born after January 2, 1949, and your AGI is $40,000, 10% of which is $4,000. Military h&r block You paid medical expenses of $2,500. Military h&r block You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Military h&r block Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Military h&r block There are different rules for decedents and for individuals who are the subject of multiple support agreements. Military h&r block See Support claimed under a multiple support agreement , later under Qualifying Relative. Military h&r block Spouse You can include medical expenses you paid for your spouse. Military h&r block To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Military h&r block Example 1. Military h&r block Mary received medical treatment before she married Bill. Military h&r block Bill paid for the treatment after they married. Military h&r block Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Military h&r block If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Military h&r block Mary would include the amounts she paid during the year in her separate return. Military h&r block If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Military h&r block Example 2. Military h&r block This year, John paid medical expenses for his wife Louise, who died last year. Military h&r block John married Belle this year and they file a joint return. Military h&r block Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Military h&r block Dependent You can include medical expenses you paid for your dependent. Military h&r block For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Military h&r block A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Military h&r block The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Military h&r block S. Military h&r block citizen or national or a resident of the United States, Canada, or Mexico. Military h&r block If your qualifying child was adopted, see Exception for adopted child , later. Military h&r block You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Military h&r block Exception for adopted child. Military h&r block   If you are a U. Military h&r block S. Military h&r block citizen or national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Military h&r block S. Military h&r block citizen or national, or a resident of the United States, Canada, or Mexico. Military h&r block Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, other than to claim a refund. Military h&r block Adopted child. Military h&r block   A legally adopted child is treated as your own child. Military h&r block This child includes a child lawfully placed with you for legal adoption. Military h&r block   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Military h&r block   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Military h&r block   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Military h&r block    You may be able to take a credit for other expenses related to an adoption. Military h&r block See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Military h&r block Child of divorced or separated parents. Military h&r block   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Military h&r block Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Military h&r block This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Military h&r block Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, or foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of any of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child, earlier) of any taxpayer for 2013, and For whom you provided over half of the support in 2013. Military h&r block But see Child of divorced or separated parents , earlier, Support claimed under a multiple support agreement, next, and Kidnapped child under Qualifying Relative in Publication 501. Military h&r block Support claimed under a multiple support agreement. Military h&r block   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Military h&r block A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Military h&r block   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Military h&r block However, you can include the entire unreimbursed amount you paid for medical expenses. Military h&r block Example. Military h&r block You and your three brothers each provide one-fourth of your mother's total support. Military h&r block Under a multiple support agreement, you treat your mother as your dependent. Military h&r block You paid all of her medical expenses. Military h&r block Your brothers repaid you for three-fourths of these expenses. Military h&r block In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Military h&r block Your brothers cannot include any part of the expenses. Military h&r block However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Military h&r block Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Military h&r block This includes expenses for the decedent's spouse and dependents as well as for the decedent. Military h&r block The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Military h&r block The expenses must be paid within the 1-year period beginning with the day after the date of death. Military h&r block If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Military h&r block Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Military h&r block What if the decedent's return had been filed and the medical expenses were not included?   Form 1040X can be filed for the year or years the expenses are treated as paid, unless the period for filing an amended return for that year has passed. Military h&r block Generally, an amended return must be filed within 3 years of the date the original return was filed, or within 2 years from the time the tax was paid, whichever date is later. Military h&r block Example. Military h&r block John properly filed his 2012 income tax return. Military h&r block He died in 2013 with unpaid medical expenses of $1,500 from 2012 and $1,800 in 2013. Military h&r block If the expenses are paid within the 1-year period, his survivor or personal representative can file an amended return for 2012 claiming a deduction based on the $1,500 medical expenses. Military h&r block The $1,800 of medical expenses from 2013 can be included on the decedent's final return for 2013. Military h&r block What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Military h&r block The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Military h&r block What Medical Expenses Are Includible? Following is a list of items that you can include in figuring your medical expense deduction. Military h&r block The items are listed in alphabetical order. Military h&r block This list does not include all possible medical expenses. Military h&r block To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Military h&r block Abortion You can include in medical expenses the amount you pay for a legal abortion. Military h&r block Acupuncture You can include in medical expenses the amount you pay for acupuncture. Military h&r block Alcoholism You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for alcohol addiction. Military h&r block This includes meals and lodging provided by the center during treatment. Military h&r block You can also include in medical expenses amounts you pay for transportation to and from Alcoholics Anonymous meetings in your community if the attendance is pursuant to medical advice that membership in Alcoholics Anonymous is necessary for the treatment of a disease involving the excessive use of alcoholic liquors. Military h&r block Ambulance You can include in medical expenses amounts you pay for ambulance service. Military h&r block Annual Physical Examination See Physical Examination , later. Military h&r block Artificial Limb You can include in medical expenses the amount you pay for an artificial limb. Military h&r block Artificial Teeth You can include in medical expenses the amount you pay for artificial teeth. Military h&r block Bandages You can include in medical expenses the cost of medical supplies such as bandages. Military h&r block Birth Control Pills You can include in medical expenses the amount you pay for birth control pills prescribed by a doctor. Military h&r block Body Scan You can include in medical expenses the cost of an electronic body scan. Military h&r block Braille Books and Magazines You can include in medical expenses the part of the cost of Braille books and magazines for use by a visually impaired person that is more than the cost of regular printed editions. Military h&r block Breast Pumps and Supplies You can include in medical expenses the cost of breast pumps and supplies that assist lactation. Military h&r block Breast Reconstruction Surgery You can include in medical expenses the amounts you pay for breast reconstruction surgery, as well as breast prosthesis, following a mastectomy for cancer. Military h&r block See Cosmetic Surgery , later. Military h&r block Capital Expenses You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. Military h&r block The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. Military h&r block The cost of the improvement is reduced by the increase in the value of your property. Military h&r block The difference is a medical expense. Military h&r block If the value of your property is not increased by the improvement, the entire cost is included as a medical expense. Military h&r block Certain improvements made to accommodate a home to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. Military h&r block These improvements include, but are not limited to, the following items. Military h&r block Constructing entrance or exit ramps for your home. Military h&r block Widening doorways at entrances or exits to your home. Military h&r block Widening or otherwise modifying hallways and interior doorways. Military h&r block Installing railings, support bars, or other modifications to bathrooms. Military h&r block Lowering or modifying kitchen cabinets and equipment. Military h&r block Moving or modifying electrical outlets and fixtures. Military h&r block Installing porch lifts and other forms of lifts (but elevators generally add value to the house). Military h&r block Modifying fire alarms, smoke detectors, and other warning systems. Military h&r block Modifying stairways. Military h&r block Adding handrails or grab bars anywhere (whether or not in bathrooms). Military h&r block Modifying hardware on doors. Military h&r block Modifying areas in front of entrance and exit doorways. Military h&r block Grading the ground to provide access to the residence. Military h&r block Only reasonable costs to accommodate a home to a disabled condition are considered medical care. Military h&r block Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. Military h&r block Capital expense worksheet. Military h&r block   Use Worksheet A to figure the amount of your capital expense to include in your medical expenses. Military h&r block Worksheet A. Military h&r block Capital Expense Worksheet Instructions: Use this worksheet to figure the amount, if any, of your medical expenses due to a home improvement. Military h&r block 1. Military h&r block Enter the amount you paid for the home improvement 1. Military h&r block   2. Military h&r block Enter the value of your home immediately after the improvement 2. Military h&r block       3. Military h&r block Enter the value of your home immediately before the improvement 3. Military h&r block       4. Military h&r block Subtract line 3 from line 2. Military h&r block This is the increase in the value of your home due to the improvement 4. Military h&r block     • If line 4 is more than or equal to line 1, you have no medical expenses due to the home improvement; stop here. Military h&r block       • If line 4 is less than line 1, go to line 5. Military h&r block     5. Military h&r block Subtract line 4 from line 1. Military h&r block These are your medical expenses due to the home improvement 5. Military h&r block   Operation and upkeep. Military h&r block   Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. Military h&r block This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense. Military h&r block Improvements to property rented by a person with a disability. Military h&r block   Amounts paid to buy and install special plumbing fixtures for a person with a disability, mainly for medical reasons, in a rented house are medical expenses. Military h&r block Example. Military h&r block John has arthritis and a heart condition. Military h&r block He cannot climb stairs or get into a bathtub. Military h&r block On his doctor's advice, he installs a bathroom with a shower stall on the first floor of his two-story rented house. Military h&r block The landlord did not pay any of the cost of buying and installing the special plumbing and did not lower the rent. Military h&r block John can include in medical expenses the entire amount he paid. Military h&r block Car You can include in medical expenses the cost of special hand controls and other special equipment installed in a car for the use of a person with a disability. Military h&r block Special design. Military h&r block   You can include in medical expenses the difference between the cost of a regular car and a car specially designed to hold a wheelchair. Military h&r block Cost of operation. Military h&r block   The includible costs of using a car for medical reasons are explained under Transportation , later. Military h&r block Chiropractor You can include in medical expenses fees you pay to a chiropractor for medical care. Military h&r block Christian Science Practitioner You can include in medical expenses fees you pay to Christian Science practitioners for medical care. Military h&r block Contact Lenses You can include in medical expenses amounts you pay for contact lenses needed for medical reasons. Military h&r block You can also include the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner. Military h&r block See Eyeglasses and Eye Surgery , later. Military h&r block Crutches You can include in medical expenses the amount you pay to buy or rent crutches. Military h&r block Dental Treatment You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Military h&r block Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Military h&r block Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments. Military h&r block But see Teeth Whitening under What Expenses Are Not Includible, later. Military h&r block Diagnostic Devices You can include in medical expenses the cost of devices used in diagnosing and treating illness and disease. Military h&r block Example. Military h&r block You have diabetes and use a blood sugar test kit to monitor your blood sugar level. Military h&r block You can include the cost of the blood sugar test kit in your medical expenses. Military h&r block Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Military h&r block (See Publication 503, Child and Dependent Care Expenses. Military h&r block ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Military h&r block Drug Addiction You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for drug addiction. Military h&r block This includes meals and lodging at the center during treatment. Military h&r block Drugs See Medicines , later. Military h&r block Eye Exam You can include in medical expenses the amount you pay for eye examinations. Military h&r block Eyeglasses You can include in medical expenses amounts you pay for eyeglasses and contact lenses needed for medical reasons. Military h&r block See Contact Lenses , earlier, for more information. Military h&r block Eye Surgery You can include in medical expenses the amount you pay for eye surgery to treat defective vision, such as laser eye surgery or radial keratotomy. Military h&r block Fertility Enhancement You can include in medical expenses the cost of the following procedures to overcome an inability to have children. Military h&r block Procedures such as in vitro fertilization (including temporary storage of eggs or sperm). Military h&r block Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children. Military h&r block Founder's Fee See Lifetime Care—Advance Payments , later. Military h&r block Guide Dog or Other Service Animal You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. Military h&r block In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties. Military h&r block Health Institute You can include in medical expenses fees you pay for treatment at a health institute only if the treatment is prescribed by a physician and the physician issues a statement that the treatment is necessary to alleviate a physical or mental defect or illness of the individual receiving the treatment. Military h&r block Health Maintenance Organization (HMO) You can include in medical expenses amounts you pay to entitle you, your spouse, or a dependent to receive medical care from an HMO. Military h&r block These amounts are treated as medical insurance premiums. Military h&r block See Insurance Premiums , later. Military h&r block Hearing Aids You can include in medical expenses the cost of a hearing aid and batteries, repairs, and maintenance needed to operate it. Military h&r block Home Care See Nursing Services , later. Military h&r block Home Improvements See Capital Expenses , earlier. Military h&r block Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. Military h&r block This includes amounts paid for meals and lodging. Military h&r block Also see Lodging , later. Military h&r block Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Military h&r block Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Military h&r block See Qualified Long-Term Care Insurance Contracts under Long-Term Care, later. Military h&r block If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Military h&r block The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Military h&r block Health coverage tax credit. Military h&r block   If, during 2013, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient, you must complete Form 8885 before completing Schedule A. Military h&r block When figuring the amount of insurance premiums you can deduct on Schedule A, do not include: Any amounts you included on Form 8885, Any qualified health insurance premiums you paid to “U. Military h&r block S. Military h&r block Treasury–HCTC,” or Any health coverage tax credit advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Military h&r block Employer-Sponsored Health Insurance Plan Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, Wage and Tax Statement. Military h&r block Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included on your Form W-2. Military h&r block Example. Military h&r block You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Military h&r block Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Military h&r block Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Military h&r block Long-term care services. Military h&r block   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Military h&r block This amount will be reported as wages on your Form W-2. Military h&r block Retired public safety officers. Military h&r block   If you are a retired public safety officer, do not include as medical expenses any health or long-term care insurance premiums that you elected to have paid with tax-free distributions from a retirement plan. Military h&r block This applies only to distributions that would otherwise be included in income. Military h&r block Health reimbursement arrangement (HRA). Military h&r block   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Military h&r block This is because an HRA is funded solely by the employer. Military h&r block Medicare A If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Military h&r block The payroll tax paid for Medicare A is not a medical expense. Military h&r block If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Military h&r block In this situation you can include the premiums you paid for Medicare A as a medical expense. Military h&r block Medicare B Medicare B is a supplemental medical insurance. Military h&r block Premiums you pay for Medicare B are a medical expense. Military h&r block Check the information you received from the Social Security Administration to find out your premium. Military h&r block Medicare D Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Military h&r block You can include as a medical expense premiums you pay for Medicare D. Military h&r block Prepaid Insurance Premiums Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Military h&r block Unused Sick Leave Used To Pay Premiums You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Military h&r block You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Military h&r block You can include this cost of continuing participation in the health plan as a medical expense. Military h&r block If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Military h&r block You cannot include this cost of continuing participation in that health plan as a medical expense. Military h&r block Insurance Premiums You Cannot Include You cannot include premiums you pay for: Life insurance policies, Policies providing payment for loss of earnings, Policies for loss of life, limb, sight, etc. Military h&r block , Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury, The part of your car insurance that provides medical insurance coverage for all persons injured in or by your car because the part of the premium providing insurance for you, your spouse, and your dependents is not stated separately from the part of the premium providing insurance for medical care for others, or Health or long-term care insurance if you elected to pay these premiums with tax-free distributions from a retirement plan made directly to the insurance provider and these distributions would otherwise have been included in income. Military h&r block Taxes imposed by any governmental unit, such as Medicare taxes, are not insurance premiums. Military h&r block Coverage for nondependents. Military h&r block   Generally, you cannot deduct any additional premium you pay as the result of including on your policy someone who is not your spouse or dependent, even if that person is your child under age 27. Military h&r block However, you can deduct the additional premium if that person is: Your child whom you do not claim as a dependent because of the rules for children of divorced or separated parents, Any person you could have claimed as a dependent on your return except that person received $3,900 or more of gross income or filed a joint return, or Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's 2013 return. Military h&r block  Also, if you had family coverage when you added this individual to your policy and your premiums did not increase, you can enter on Schedule A (Form 1040) the full amount of your medical and dental insurance premiums. Military h&r block Intellectually and Developmentally Disabled, Special Home for You can include in medical expenses the cost of keeping a person who is intellectually and developmentally disabled in a special home, not the home of a relative, on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital to community living. Military h&r block Laboratory Fees You can include in medical expenses the amounts you pay for laboratory fees that are part of medical care. Military h&r block Lactation Expenses See Breast Pumps and Supplies , earlier. Military h&r block Lead-Based Paint Removal You can include in medical expenses the cost of removing lead-based paints from surfaces in your home to prevent a child who has or had lead poisoning from eating the paint. Military h&r block These surfaces must be in poor repair (peeling or cracking) or within the child's reach. Military h&r block The cost of repainting the scraped area is not a medical expense. Military h&r block If, instead of removing the paint, you cover the area with wallboard or paneling, treat these items as capital expenses. Military h&r block See Capital Expenses , earlier. Military h&r block Do not include the cost of painting the wallboard as a medical expense. Military h&r block Learning Disability See Special Education , later. Military h&r block Legal Fees You can include in medical expenses legal fees you paid that are necessary to authorize treatment for mental illness. Military h&r block However, you cannot include in medical expenses fees for the management of a guardianship estate, fees for conducting the affairs of the person being treated, or other fees that are not necessary for medical care. Military h&r block Lifetime Care—Advance Payments You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. Military h&r block The part of the payment you include is the amount properly allocable to medical care. Military h&r block The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care. Military h&r block You can use a statement from the retirement home to prove the amount properly allocable to medical care. Military h&r block The statement must be based either on the home's prior experience or on information from a comparable home. Military h&r block Dependents with disabilities. Military h&r block   You can include in medical expenses advance payments to a private institution for lifetime care, treatment, and training of your physically or mentally impaired child upon your death or when you become unable to provide care. Military h&r block The payments must be a condition for the institution's future acceptance of your child and must not be refundable. Military h&r block Payments for future medical care. Military h&r block   Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. Military h&r block This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care of the type described earlier. Military h&r block Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. Military h&r block See Nursing Home , later. Military h&r block You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Military h&r block You can include the cost of such lodging while away from home if all of the following requirements are met. Military h&r block The lodging is primarily for and essential to medical care. Military h&r block The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Military h&r block The lodging is not lavish or extravagant under the circumstances. Military h&r block There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Military h&r block The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Military h&r block You can include lodging for a person traveling with the person receiving the medical care. Military h&r block For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Military h&r block Meals are not included. Military h&r block Do not include the cost of lodging while away from home for medical treatment if that treatment is not received from a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital or if that lodging is not primarily for or essential to the medical care received. Military h&r block Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. Military h&r block Qualified Long-Term Care Services Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided pursuant to a plan of care prescribed by a licensed health care practitioner. Military h&r block Chronically ill individual. Military h&r block   An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. Military h&r block He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Military h&r block Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Military h&r block He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Military h&r block Maintenance and personal care services. Military h&r block    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). Military h&r block Qualified Long-Term Care Insurance Contracts A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. Military h&r block The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. Military h&r block The amount of qualified long-term care premiums you can include is limited. Military h&r block You can include the following as medical expenses on Schedule A (Form 1040). Military h&r block Qualified long-term care premiums up to the following amounts. Military h&r block Age 40 or under – $360. Military h&r block Age 41 to 50 – $680. Military h&r block Age 51 to 60 – $1,360. Military h&r block Age 61 to 70 – $3,640. Military h&r block Age 71 or over – $4,550. Military h&r block Unreimbursed expenses for qualified long-term care services. Military h&r block Note. Military h&r block The limit on premiums is for each person. Military h&r block Also, if you are an eligible retired public safety officer, you cannot include premiums for long-term care insurance if you elected to pay these premiums with tax-free distributions from a qualified retirement plan made directly to the insurance provider and these distributions would otherwise have been included in your income. Military h&r block Meals You can include in medical expenses the cost of meals at a hospital or similar institution if a principal reason for being there is to get medical care. Military h&r block You cannot include in medical expenses the cost of meals that are not part of inpatient care. Military h&r block Also see Weight-Loss Program and Nutritional Supplements , later. Military h&r block Medical Conferences You can include in medical expenses amounts paid for admission and transportation to a medical conference if the medical conference concerns the chronic illness of yourself, your spouse, or your dependent. Military h&r block The costs of the medical conference must be primarily for and necessary to the medical care of you, your spouse, or your dependent. Military h&r block The majority of the time spent at the conference must be spent attending sessions on medical information. Military h&r block The cost of meals and lodging while attending the conference is not deductible as a medical expense. Military h&r block Medical Information Plan You can include in medical expenses amounts paid to a plan that keeps medical information in a computer data bank and retrieves and furnishes the information upon request to an attending physician. Military h&r block Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. Military h&r block A prescribed drug is one that requires a prescription by a doctor for its use by an individual. Military h&r block You can also include amounts you pay for insulin. Military h&r block Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Military h&r block Imported medicines and drugs. Military h&r block   If you imported medicines or drugs from other countries, see Medicines and Drugs From Other Countries , under What Expenses Are Not Includible, later. Military h&r block Nursing Home You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Military h&r block This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Military h&r block Do not include the cost of meals and lodging if the reason for being in the home is personal. Military h&r block You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Military h&r block Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. Military h&r block The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. Military h&r block This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. Military h&r block These services can be provided in your home or another care facility. Military h&r block Generally, only the amount spent for nursing services is a medical expense. Military h&r block If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. Military h&r block For example, because of your medical condition you pay a visiting nurse $300 per week for medical and household services. Military h&r block She spends 10% of her time doing household services such as washing dishes and laundry. Military h&r block You can include only $270 per week as medical expenses. Military h&r block The $30 (10% × $300) allocated to household services cannot be included. Military h&r block However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Military h&r block See Maintenance and personal care services under Long-Term Care, earlier. Military h&r block Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. Military h&r block See Publication 503. Military h&r block You can also include in medical expenses part of the amount you pay for that attendant's meals. Military h&r block Divide the food expense among the household members to find the cost of the attendant's food. Military h&r block Then divide that cost in the same manner as in the preceding paragraph. Military h&r block If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. Military h&r block This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. Military h&r block Employment taxes. Military h&r block   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for an attendant who provides medical care. Military h&r block If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier. Military h&r block For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. Military h&r block Operations You can include in medical expenses amounts you pay for legal operations that are not for unnecessary cosmetic surgery. Military h&r block See Cosmetic Surgery under What Expenses Are Not Includible, later. Military h&r block Optometrist See Eyeglasses , earlier. Military h&r block Organ Donors See Transplants , later. Military h&r block Osteopath You can include in medical expenses amounts you pay to an osteopath for medical care. Military h&r block Oxygen You can include in medical expenses amounts you pay for oxygen and oxygen equipment to relieve breathing problems caused by a medical condition. Military h&r block Physical Examination You can include in medical expenses the amount you pay for an annual physical examination and diagnostic tests by a physician. Military h&r block You do not have to be ill at the time of the examination. Military h&r block Pregnancy Test Kit You can include in medical expenses the amount you pay to purchase a pregnancy test kit to determine if you are pregnant. Military h&r block Prosthesis See Artificial Limb and Breast Reconstruction Surgery , earlier. Military h&r block Psychiatric Care You can include in medical expenses amounts you pay for psychiatric care. Military h&r block This includes the cost of supporting a mentally ill dependent at a specially equipped medical center where the dependent receives medical care. Military h&r block See Psychoanalysis, next, and Transportation , later. Military h&r block Psychoanalysis You can include in medical expenses payments for psychoanalysis. Military h&r block However, you cannot include payments for psychoanalysis that is part of required training to be a psychoanalyst. Military h&r block Psychologist You can include in medical expenses amounts you pay to a psychologist for medical care. Military h&r block Special Education You can include in medical expenses fees you pay on a doctor's recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders. Military h&r block You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. Military h&r block A doctor must recommend that the child attend the school. Military h&r block Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Military h&r block Special education includes: Teaching Braille to a visually impaired person, Teaching lip reading to a hearing disabled person, or Giving remedial language training to correct a condition caused by a birth defect. Military h&r block Sterilization You can include in medical expenses the cost of a legal sterilization (a legally performed operation to make a person unable to have children). Military h&r block Also see Vasectomy , later. Military h&r block Stop-Smoking Programs You can include in medical expenses amounts you pay for a program to stop smoking. Military h&r block However, you cannot include in medical expenses amounts you pay for drugs that do not require a prescription, such as nicotine gum or patches, that are designed to help stop smoking. Military h&r block Surgery See Operations , earlier. Military h&r block Telephone You can include in medical expenses the cost of special telephone equipment that lets a person who is deaf, hard of hearing or has a speech disability communicate over a regular telephone. Military h&r block This includes teletypewriter (TTY) and telecommunications device for the deaf (TDD) equipment. Military h&r block You can also include the cost of repairing the equipment. Military h&r block Television You can include in medical expenses the cost of equipment that displays the audio part of television programs as subtitles for persons with a hearing disability. Military h&r block This may be the cost of an adapter that attaches to a regular set. Military h&r block It also may be the part of the cost of a specially equipped television that exceeds the cost of the same model regular television set. Military h&r block Therapy You can include in medical expenses amounts you pay for therapy received as medical treatment. Military h&r block Transplants You can include in medical expenses amounts paid for medical care you receive because you are a donor or a possible donor of a kidney or other organ. Military h&r block This includes transportation. Military h&r block You can include any expenses you pay for the medical care of a donor in connection with the donating of an organ. Military h&r block This includes transportation. Military h&r block Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Military h&r block You can include:    Bus, taxi, train, or plane fares or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Military h&r block Car expenses. Military h&r block   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. Military h&r block You cannot include depreciation, insurance, general repair, or maintenance expenses. Military h&r block   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. Military h&r block    You can also include parking fees and tolls. Military h&r block You can add these fees and tolls to your medical expenses whether you use actual expenses or the standard mileage rate. Military h&r block Example. Military h&r block In 2013, Bill Jones drove 2,800 miles for medical reasons. Military h&r block He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Military h&r block He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Military h&r block He figures the actual expenses first. Military h&r block He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Military h&r block He then figures the standard mileage amount. Military h&r block He multiplies 2,800 miles by 24 cents a mile for a total of $672. Military h&r block He then adds the $100 tolls and parking for a total of $772. Military h&r block Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Military h&r block Transportation expenses you cannot include. Military h&r block    You cannot include in medical expenses the cost of transportation in the following situations. Military h&r block Going to and from work, even if your condition requires an unusual means of transportation. Military h&r block Travel for purely personal reasons to another city for an operation or other medical care. Military h&r block Travel that is merely for the general improvement of one's health. Military h&r block The costs of operating a specially equipped car for other than medical reasons. Military h&r block Trips You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. Military h&r block You may be able to include up to $50 for each night for each person. Military h&r block You can include lodging for a person traveling with the person receiving the medical care. Military h&r block For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Military h&r block Meals are not included. Military h&r block See Lodging , earlier. Military h&r block You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. Military h&r block However, see Medical Conferences , earlier. Military h&r block Tuition Under special circumstances, you can include charges for tuition in medical expenses. Military h&r block See Special Education , earlier. Military h&r block You can include charges for a health plan included in a lump-sum tuition fee if the charges are separately stated or can easily be obtained from the school. Military h&r block Vasectomy You can include in medical expenses the amount you pay for a vasectomy. Military h&r block Vision Correction Surgery See Eye Surgery , earlier. Military h&r block Weight-Loss Program You can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Military h&r block This includes fees you pay for membership in a weight reduction group as well as fees for attendance at periodic meetings. Military h&r block You cannot include membership dues in a gym, health club, or spa as medical expenses, but you can include separate fees charged there for weight loss activities. Military h&r block You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. Military h&r block You can include the cost of special food in medical expenses only if: The food does not satisfy normal nutritional needs, The food alleviates or treats an illness, and The need for the food is substantiated by a physician. Military h&r block The amount you can include in medical expenses is limited to the amount by which the cost of the special food exceeds the cost of a normal diet. Military h&r block See also Weight-Loss Program under What Expenses Are Not Includible, later. Military h&r block Wheelchair You can include in medical expenses amounts you pay for a wheelchair used mainly for the relief of sickness or disability, and not just to provide transportation to and from work. Military h&r block The cost of operating and maintaining the wheelchair is also a medical expense. Military h&r block Wig You can include in medical expenses the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his or her hair from disease. Military h&r block X-ray You can include in medical expenses amounts you pay for X-rays for medical reasons. Military h&r block What Expenses Are Not Includible? Following is a list of some items that you cannot include in figuring your medical expense deduction. Military h&r block The items are listed in alphabetical order. Military h&r block Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby You cannot include in medical expenses amounts you pay for the care of children, even if the expenses enable you, your spouse, or your dependent to get medical or dental treatment. Military h&r block Also, any expense allowed as a childcare credit cannot be treated as an expense paid for medical care. Military h&r block Controlled Substances You cannot include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc. Military h&r block ), even if such substances are legalized by state law. Military h&r block Such substances are not legal under federal law and cannot be included in medical expenses. Military h&r block Cosmetic Surgery Generally, you cannot include in medical expenses the amount you pay for unnecessary cosmetic surgery. Military h&r block This includes any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Military h&r block You generally cannot include in medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction. Military h&r block You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Military h&r block Example. Military h&r block An individual undergoes surgery that removes a breast as part of treatment for cancer. Military h&r block She pays a surgeon to reconstruct the breast. Military h&r block The surgery to reconstruct the breast corrects a deformity directly related to the disease. Military h&r block The cost of the surgery is includible in her medical expenses. Military h&r block Dancing Lessons You cannot include in medical expenses the cost of dancing lessons, swimming lessons, etc. Military h&r block , even if they are recommended by a doctor, if they are only for the improvement of general health. Military h&r block Diaper Service You cannot include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease. Military h&r block Electrolysis or Hair Removal See Cosmetic Surgery , earlier. Military h&r block Flexible Spending Account You cannot include in medical expenses amounts for which you are fully reimbursed by your flexible spending account if you contribute a part of your income on a pre-tax basis to pay for the qualified benefit. Military h&r block Funeral Expenses You cannot include in medical expenses amounts you pay for funerals. Military h&r block Future Medical Care Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. Military h&r block This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care or long-term care of the type described at Lifetime Care—Advance Payments or Long-Term Care, earlier under What Medical Expenses Are Includible. Military h&r block Hair Transplant See Cosmetic Surgery , earlier. Military h&r block Health Club Dues You cannot include in medical expenses health club dues or amounts paid to improve one's general health or to relieve physical or mental discomfort not related to a particular medical condition. Military h&r block You cannot include in medical expenses the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Military h&r block Health Coverage Tax Credit You cannot include in medical expenses amounts you pay for health insurance that you use in figuring your health coverage tax credit. Military h&r block For more information, see Health Coverage Tax Credit , later. Military h&r block Health Savings Accounts You cannot include in medical expenses any payment or distribution for medical expenses out of a health savings account. Military h&r block Contributions to health savings accounts are deducted separately. Military h&r block See Publication 969. Military h&r block Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. Military h&r block This is a personal expense that is not deductible. Military h&r block However, you may be able to include certain expenses paid to a person providing nursing-type services. Military h&r block For more information, see Nursing Services , earlier under What Medical Expenses Are Includible. Military h&r block Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Military h&r block For more information, see Long-Term Care , earlier under What Medical Expenses Are Includible. Military h&r block Illegal Operations and Treatments You cannot include in medical expenses amounts you pay for illegal operations, treatments, or controlled substances whether rendered or prescribed by licensed or unlicensed practitioners. Military h&r block Insurance Premiums See Insurance Premiums under What Medical Expenses Are Includible, earlier. Military h&r block Maternity Clothes You cannot include in medical expenses amounts you pay for maternity clothes. Military h&r block Medical Savings Account (MSA) You cannot include in medical expenses amounts you contribute to an Archer MSA. Military h&r block You cannot include expenses you pay for with a tax-free distribution from your Archer MSA. Military h&r block You also cannot use other funds equal to the amount of the distribution and include the expenses. Military h&r block For more information on Archer MSAs, see Publication 969. Military h&r block Medicines and Drugs From Other Countries In general, you cannot include in your medical expenses the cost of a prescribed drug brought in (or ordered shipped) from another country. Military h&r block You can only include the cost of a drug that was imported legally. Military h&r block For example, you can include the cost of a prescribed drug the Food and Drug Administration announces can be legally imported by individuals. Military h&r block You can include the cost of a prescribed drug you purchase and consume in another country if the drug is legal in both the other country and the United States. Military h&r block Nonprescription Drugs and Medicines Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Military h&r block Example. Military h&r block Your doctor recommends that you take aspirin. Military h&r block Because aspirin is a drug that does not require a physician's prescription, you cannot include its cost in your medical expenses. Military h&r block Nutritional Supplements You cannot include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Military h&r block unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Military h&r block Otherwise, these items are taken to maintain your ordinary good health, and are not for medical care. Military h&r block Personal Use Items You cannot include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental defect or illness. Military h&r block For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense. Military h&r block In order to accommodate an individual with a physical defect, you may have to purchase an item ordinarily used as a personal, living, or family item in a special form. Military h&r block You can include the excess of the cost of the item in a special form over the cost of the item in normal form as a medical expense. Military h&r block (See Braille Books and Magazines under What Medical Expenses Are Includible, earlier. Military h&r block ) Swimming Lessons See Dancing Lessons , earlier. Military h&r block Teeth Whitening You cannot include in medical expenses amounts paid to whiten teeth. Military h&r block See Cosmetic Surgery , earlier. Military h&r block Veterinary Fees You generally cannot include veterinary fees in your medical expenses, but see Guide Dog or Other Service Animal under What Medical Expenses Are Includible, earlier. Military h&r block Weight-Loss Program You cannot include in medical expenses the cost of a weight-loss program if the purpose of the weight loss is the improvement of appearance, general health, or sense of well-being. Military h&r block You cannot include amounts you pay to lose weight unless the weight loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Military h&r block If the weight-loss treatment is not for a specific disease diagnosed by a physician, you cannot include either the fees you pay for membership in a weight reduction group or fees for attendance at periodic meetings. Military h&r block Also, you cannot include membership dues in a gym, health club, or spa. Military h&r block You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. Military h&r block See Weight-Loss Program under What Medical Expenses Are Includible, earlier. Military h&r block How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the tax year for which you received no insurance or other reimbursement. Military h&r block Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Military h&r block This includes payments from Medicare. Military h&r block Even if a policy provides reimbursement only for certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Military h&r block Example. Military h&r block You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Military h&r block The insurance you receive for the hospital and doctors' bills is more than their charges. Military h&r block In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Military h&r block Health reimbursement arrange
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Publication 17, Your Federal Income Tax

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The Military H&r Block

Military h&r block 2. Military h&r block   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. Military h&r block You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. Military h&r block Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. Military h&r block You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. Military h&r block You can deduct depreciation only on the part of your property used for rental purposes. Military h&r block Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. Military h&r block You may have to use Form 4562 to figure and report your depreciation. Military h&r block See Which Forms To Use in chapter 3. Military h&r block Also see Publication 946. Military h&r block Section 179 deduction. Military h&r block   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. Military h&r block This deduction is not allowed for property used in connection with residential rental property. Military h&r block See chapter 2 of Publication 946. Military h&r block Alternative minimum tax (AMT). Military h&r block   If you use accelerated depreciation, you may be subject to the AMT. Military h&r block Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). Military h&r block   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. Military h&r block However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). Military h&r block   To find out if you are subject to the AMT, see the Instructions for Form 6251. Military h&r block The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. Military h&r block What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. Military h&r block You own the property. Military h&r block You use the property in your business or income-producing activity (such as rental property). Military h&r block The property has a determinable useful life. Military h&r block The property is expected to last more than one year. Military h&r block Property you own. Military h&r block   To claim depreciation, you usually must be the owner of the property. Military h&r block You are considered as owning property even if it is subject to a debt. Military h&r block Rented property. Military h&r block   Generally, if you pay rent for property, you cannot depreciate that property. Military h&r block Usually, only the owner can depreciate it. Military h&r block However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. Military h&r block See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Military h&r block Cooperative apartments. Military h&r block   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. Military h&r block See chapter 4, Special Situations. Military h&r block Property having a determinable useful life. Military h&r block   To be depreciable, your property must have a determinable useful life. Military h&r block This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. Military h&r block What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. Military h&r block This includes land and certain excepted property. Military h&r block Land. Military h&r block   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. Military h&r block But if it does, the loss is accounted for upon disposition. Military h&r block The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. Military h&r block   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. Military h&r block These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. Military h&r block Example. Military h&r block You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. Military h&r block Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. Military h&r block If you replace the house, you would have to destroy the bushes and trees right next to it. Military h&r block These bushes and trees are closely associated with the house, so they have a determinable useful life. Military h&r block Therefore, you can depreciate them. Military h&r block Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. Military h&r block Excepted property. Military h&r block   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. Military h&r block Property placed in service and disposed of (or taken out of business use) in the same year. Military h&r block Equipment used to build capital improvements. Military h&r block You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. Military h&r block For more information, see chapter 1 of Publication 946. Military h&r block When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. Military h&r block You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. Military h&r block Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. Military h&r block Even if you are not using the property, it is in service when it is ready and available for its specific use. Military h&r block Example 1. Military h&r block On November 22 of last year, you purchased a dishwasher for your rental property. Military h&r block The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. Military h&r block Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. Military h&r block If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. Military h&r block Example 2. Military h&r block On April 6, you purchased a house to use as residential rental property. Military h&r block You made extensive repairs to the house and had it ready for rent on July 5. Military h&r block You began to advertise the house for rent in July and actually rented it beginning September 1. Military h&r block The house is considered placed in service in July when it was ready and available for rent. Military h&r block You can begin to depreciate the house in July. Military h&r block Example 3. Military h&r block You moved from your home in July. Military h&r block During August and September you made several repairs to the house. Military h&r block On October 1, you listed the property for rent with a real estate company, which rented it on December 1. Military h&r block The property is considered placed in service on October 1, the date when it was available for rent. Military h&r block Conversion to business use. Military h&r block   If you place property in service in a personal activity, you cannot claim depreciation. Military h&r block However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. Military h&r block You place the property in service for business or income-producing use on the date of the change. Military h&r block Example. Military h&r block You bought a house and used it as your personal home several years before you converted it to rental property. Military h&r block Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. Military h&r block You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. Military h&r block Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). Military h&r block For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. Military h&r block Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. Military h&r block For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. Military h&r block See Basis of Depreciable Property , later. Military h&r block Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. Military h&r block You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. Military h&r block You sell or exchange the property. Military h&r block You convert the property to personal use. Military h&r block You abandon the property. Military h&r block The property is destroyed. Military h&r block Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. Military h&r block If you placed rental property in service before 1987, you are using one of the following methods. Military h&r block ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. Military h&r block Straight line or declining balance method over the useful life of property placed in service before 1981. Military h&r block See MACRS Depreciation , later, for more information. Military h&r block Rental property placed in service before 2013. Military h&r block   Continue to use the same method of figuring depreciation that you used in the past. Military h&r block Use of real property changed. Military h&r block   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. Military h&r block This includes your residence that you changed to rental use. Military h&r block See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. Military h&r block Improvements made after 1986. Military h&r block   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. Military h&r block As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. Military h&r block For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. Military h&r block This publication discusses MACRS depreciation only. Military h&r block If you need information about depreciating property placed in service before 1987, see Publication 534. Military h&r block Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. Military h&r block This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. Military h&r block If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. Military h&r block Basis and adjusted basis are explained in the following discussions. Military h&r block If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. Military h&r block See Basis of Property Changed to Rental Use in chapter 4. Military h&r block Cost Basis The basis of property you buy is usually its cost. Military h&r block The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. Military h&r block Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. Military h&r block Exception. Military h&r block   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. Military h&r block Such taxes were deductible before 1987 and after 2003. Military h&r block Loans with low or no interest. Military h&r block   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. Military h&r block See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. Military h&r block Real property. Military h&r block   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. Military h&r block Real estate taxes. Military h&r block   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. Military h&r block You cannot deduct them as taxes paid. Military h&r block   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. Military h&r block Do not include that amount in your basis in the property. Military h&r block Settlement fees and other costs. Military h&r block   The following settlement fees and closing costs for buying the property are part of your basis in the property. Military h&r block Abstract fees. Military h&r block Charges for installing utility services. Military h&r block Legal fees. Military h&r block Recording fees. Military h&r block Surveys. Military h&r block Transfer taxes. Military h&r block Title insurance. Military h&r block Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. Military h&r block   The following are settlement fees and closing costs you cannot include in your basis in the property. Military h&r block Fire insurance premiums. Military h&r block Rent or other charges relating to occupancy of the property before closing. Military h&r block Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. Military h&r block   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Military h&r block Assumption of a mortgage. Military h&r block   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. Military h&r block Example. Military h&r block You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. Military h&r block Your basis is $300,000. Military h&r block Separating cost of land and buildings. Military h&r block   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. Military h&r block The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. Military h&r block   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. Military h&r block Example. Military h&r block You buy a house and land for $200,000. Military h&r block The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. Military h&r block The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. Military h&r block You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. Military h&r block Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). Military h&r block Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. Military h&r block If you received property in one of these ways, see Publication 551 for information on how to figure your basis. Military h&r block Adjusted Basis To figure your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service for business or the production of income. Military h&r block The result of these adjustments to the basis is the adjusted basis. Military h&r block Increases to basis. Military h&r block   You must increase the basis of any property by the cost of all items properly added to a capital account. Military h&r block These include the following. Military h&r block The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. Military h&r block Amounts spent after a casualty to restore the damaged property. Military h&r block The cost of extending utility service lines to the property. Military h&r block Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. Military h&r block Additions or improvements. Military h&r block   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. Military h&r block This includes all direct costs, such as material and labor, but does not include your own labor. Military h&r block It also includes all expenses related to the addition or improvement. Military h&r block   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. Military h&r block Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. Military h&r block   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. Military h&r block For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. Military h&r block    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. Military h&r block However, see What Rental Property Cannot Be Depreciated, earlier. Military h&r block Assessments for local improvements. Military h&r block   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. Military h&r block For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Military h&r block Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. Military h&r block You cannot deduct these items as taxes or depreciate them. Military h&r block    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. Military h&r block Do not add them to your basis in the property. Military h&r block Deducting vs. Military h&r block capitalizing costs. Military h&r block   Do not add to your basis costs you can deduct as current expenses. Military h&r block However, there are certain costs you can choose either to deduct or to capitalize. Military h&r block If you capitalize these costs, include them in your basis. Military h&r block If you deduct them, do not include them in your basis. Military h&r block   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. Military h&r block   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. Military h&r block Decreases to basis. Military h&r block   You must decrease the basis of your property by any items that represent a return of your cost. Military h&r block These include the following. Military h&r block Insurance or other payment you receive as the result of a casualty or theft loss. Military h&r block Casualty loss not covered by insurance for which you took a deduction. Military h&r block Amount(s) you receive for granting an easement. Military h&r block Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. Military h&r block Exclusion from income of subsidies for energy conservation measures. Military h&r block Special depreciation allowance claimed on qualified property. Military h&r block Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. Military h&r block If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. Military h&r block   If your rental property was previously used as your main home, you must also decrease the basis by the following. Military h&r block Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. Military h&r block District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. Military h&r block Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. Military h&r block Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. Military h&r block This allowance is figured before you figure your regular depreciation deduction. Military h&r block See Publication 946, chapter 3, for details. Military h&r block Also see the Instructions for Form 4562, Line 14. Military h&r block If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. Military h&r block The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. Military h&r block MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. Military h&r block This section explains how to determine which MACRS depreciation system applies to your property. Military h&r block It also discusses other information you need to know before you can figure depreciation under MACRS. Military h&r block This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. Military h&r block Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). Military h&r block You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. Military h&r block Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. Military h&r block In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. Military h&r block However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. Military h&r block For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. Military h&r block Electing ADS If you choose, you can use the ADS method for most property. Military h&r block Under ADS, you use the straight line method of depreciation. Military h&r block The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. Military h&r block However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. Military h&r block If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. Military h&r block Once you make this election, you can never revoke it. Military h&r block For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. Military h&r block Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. Military h&r block The property class generally determines the depreciation method, recovery period, and convention. Military h&r block The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. Military h&r block Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. Military h&r block 5-year property. Military h&r block This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. Military h&r block ), automobiles, and light trucks. Military h&r block This class also includes appliances, carpeting, furniture, etc. Military h&r block , used in a residential rental real estate activity. Military h&r block Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. Military h&r block See chapter 5 of Publication 946. Military h&r block 7-year property. Military h&r block This class includes office furniture and equipment (desks, file cabinets, etc. Military h&r block ). Military h&r block This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. Military h&r block 15-year property. Military h&r block This class includes roads, fences, and shrubbery (if depreciable). Military h&r block Residential rental property. Military h&r block This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. Military h&r block It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. Military h&r block If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. Military h&r block The other property classes do not generally apply to property used in rental activities. Military h&r block These classes are not discussed in this publication. Military h&r block See Publication 946 for more information. Military h&r block Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. Military h&r block The recovery periods are generally longer under ADS than GDS. Military h&r block The recovery period of property depends on its property class. Military h&r block Under GDS, the recovery period of an asset is generally the same as its property class. Military h&r block Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. Military h&r block See Table 2-1 for recovery periods of property commonly used in residential rental activities. Military h&r block Qualified Indian reservation property. Military h&r block   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. Military h&r block For more information, see chapter 4 of Publication 946. Military h&r block Additions or improvements to property. Military h&r block   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. Military h&r block   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. Military h&r block   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. Military h&r block Example. Military h&r block You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. Military h&r block You built an addition onto the house and placed it in service in 2013. Military h&r block You must use MACRS for the addition. Military h&r block Under GDS, the addition is depreciated as residential rental property over 27. Military h&r block 5 years. Military h&r block Table 2-1. Military h&r block MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. Military h&r block 27. Military h&r block 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. Military h&r block   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. Military h&r block The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. Military h&r block Mid-month convention. Military h&r block    A mid-month convention is used for all residential rental property and nonresidential real property. Military h&r block Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. Military h&r block Mid-quarter convention. Military h&r block   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. Military h&r block   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. Military h&r block Example. Military h&r block During the tax year, Tom Martin purchased the following items to use in his rental property. Military h&r block He elects not to claim the special depreciation allowance discussed earlier. Military h&r block A dishwasher for $400 that he placed in service in January. Military h&r block Used furniture for $100 that he placed in service in September. Military h&r block A refrigerator for $800 that he placed in service in October. Military h&r block Tom uses the calendar year as his tax year. Military h&r block The total basis of all property placed in service that year is $1,300. Military h&r block The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). Military h&r block Tom must use the mid-quarter convention instead of the half-year convention for all three items. Military h&r block Half-year convention. Military h&r block    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. Military h&r block Under this convention, you treat all property placed in service, or disposed of, during a tax year as placed in service, or disposed of, at the midpoint of that tax year. Military h&r block   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. Military h&r block You deduct a full year of depreciation for any other year during the recovery period. Military h&r block Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. Military h&r block The deduction is substantially the same both ways. Military h&r block You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. Military h&r block In this publication we will use the percentage tables. Military h&r block For instructions on how to compute the deduction, see chapter 4 of Publication 946. Military h&r block Residential rental property. Military h&r block   You must use the straight line method and a mid-month convention for residential rental property. Military h&r block In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). Military h&r block 5-, 7-, or 15-year property. Military h&r block   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. Military h&r block However, in limited cases you must use the mid-quarter convention, if it applies. Military h&r block For property in the 15-year class, use the 150% declining balance method and a half-year convention. Military h&r block   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. Military h&r block The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Military h&r block You make this election on Form 4562. Military h&r block In Part III, column (f), enter “150 DB. Military h&r block ” Once you make this election, you cannot change to another method. Military h&r block   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. Military h&r block   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. Military h&r block The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. Military h&r block You elect the straight line method on Form 4562. Military h&r block In Part III, column (f), enter “S/L. Military h&r block ” Once you make this election, you cannot change to another method. Military h&r block MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. Military h&r block The tables show the percentages for the first few years or until the change to the straight line method is made. Military h&r block See Appendix A of Publication 946 for complete tables. Military h&r block The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. Military h&r block If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. Military h&r block How to use the percentage tables. Military h&r block   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. Military h&r block   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. Military h&r block   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. Military h&r block For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . Military h&r block See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. Military h&r block Unadjusted basis. Military h&r block   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. Military h&r block   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. Military h&r block For more information, see chapter 4 of Publication 946. Military h&r block Please click here for the text description of the image. Military h&r block Table 2-2 Tables 2-2a, 2-2b, and 2-2c. Military h&r block   The percentages in these tables take into account the half-year and mid-quarter conventions. Military h&r block Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. Military h&r block Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). Military h&r block If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. Military h&r block Example 1. Military h&r block You purchased a stove and refrigerator and placed them in service in June. Military h&r block Your basis in the stove is $600 and your basis in the refrigerator is $1,000. Military h&r block Both are 5-year property. Military h&r block Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. Military h&r block For that year your depreciation deduction is $120 ($600 × . Military h&r block 20) for the stove and $200 ($1,000 × . Military h&r block 20) for the refrigerator. Military h&r block For Year 2, the depreciation percentage is 32%. Military h&r block That year's depreciation deduction will be $192 ($600 × . Military h&r block 32) for the stove and $320 ($1,000 × . Military h&r block 32) for the refrigerator. Military h&r block Example 2. Military h&r block Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. Military h&r block Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . Military h&r block 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. Military h&r block Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. Military h&r block Your depreciation deduction for the refrigerator is $50 ($1,000 x . Military h&r block 05). Military h&r block Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. Military h&r block For that year, your depreciation deduction for the stove is $150 ($600 x . Military h&r block 25). Military h&r block Table 2-2d. Military h&r block    Use this table when you are using the GDS 27. Military h&r block 5 year option for residential rental property. Military h&r block Find the row for the month that you placed the property in service. Military h&r block Use the percentages listed for that month to figure your depreciation deduction. Military h&r block The mid-month convention is taken into account in the percentages shown in the table. Military h&r block Continue to use the same row (month) under the column for the appropriate year. Military h&r block Example. Military h&r block You purchased a single family rental house for $185,000 and placed it in service on February 8. Military h&r block The sales contract showed that the building cost $160,000 and the land cost $25,000. Military h&r block Your basis for depreciation is its original cost, $160,000. Military h&r block This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. Military h&r block 5 years. Military h&r block Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. Military h&r block 182%. Military h&r block That year's depreciation deduction is $5,091 ($160,000 x . Military h&r block 03182). Military h&r block Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. Military h&r block See Appendix B in Publication 946 for other property. Military h&r block If your property is not listed in Appendix B, it is considered to have no class life. Military h&r block Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. Military h&r block Use the mid-month convention for residential rental property and nonresidential real property. Military h&r block For all other property, use the half-year or mid-quarter convention, as appropriate. Military h&r block See Publication 946 for ADS depreciation tables. Military h&r block Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. Military h&r block If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. Military h&r block For more information, see Depreciation under Decreases to Basis in Publication 551. Military h&r block If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. Military h&r block S. Military h&r block Individual Income Tax Return. Military h&r block If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. Military h&r block Filing an amended return. Military h&r block   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. Military h&r block You claimed the incorrect amount because of a mathematical error made in any year. Military h&r block You claimed the incorrect amount because of a posting error made in any year. Military h&r block You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. Military h&r block You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. Military h&r block   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. Military h&r block This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. Military h&r block   If an amended return is allowed, you must file it by the later of the following dates. Military h&r block 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. Military h&r block A return filed before an unextended due date is considered filed on that due date. Military h&r block 2 years from the time you paid your tax for that year. Military h&r block Changing your accounting method. Military h&r block   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. Military h&r block In some instances, that consent is automatic. Military h&r block For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. Military h&r block Prev  Up  Next   Home   More Online Publications