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IRS Addresses Medical Expense Status of Legal Fees, Mileage and Infant Formula

    Client Alerts
  • October 31, 2008

In two recently released information letters, the IRS articulates some key legal principles related to medical expenses, specifically expenses for legal fees and mileage in a medical care guardianship situation and expenses for infant formula under a medical flexible spending account (“FSA”).

The first letter responds to a taxpayer who asked whether she could deduct attorney fees and mileage expenses incurred in establishing a guardianship for her husband, who has Alzheimer’s.  The IRS first noted that taxpayers may deduct the cost of transportation that is primarily for and essential to medical care.  It then noted that expenses “related” to medical care may be deductible “if the relationship between the expenses and the medical care is sufficiently direct.”  Lastly, the IRS noted earlier decisions holding that a taxpayer could deduct legal fees for a commitment proceeding to establish a guardianship that was necessary to provide medical treatment of the taxpayer’s spouse since a direct relationship existed between the expenses and the medical care.

The second letter responds to a taxpayer who asked why costs for infant formula are not reimbursable under a medical FSA when the mother cannot breast feed due to a double mastectomy.  Medical FSAs generally are governed by rules that define expenses for “medical care” as amounts paid for diagnosis, cure, treatment and prevention of disease.  A medical FSA also may reimburse amounts paid to purchase over-the-counter drugs.  However, expenditures for “general health,” including satisfying nutritional needs, are a personal expense and may not be deducted or reimbursed under a medical FSA.  Costs for special foods and beverages are deductible and may be reimbursed under a medical FSA only if prescribed by a physician for a specific disease and in addition to a normal diet.

While information letters are advisory only and have no binding effect on the IRS, these two letters provide useful information regarding certain types of expense for medical care and guidance for administrators of medical FSAs.