Tax Deductions for Substance Abuse Treatment

The cost of drug and alcohol rehab can be high, and if you opt for a high-end addiction treatment center or therapeutic wilderness program to ensure that you have access to everything you or your loved one needs during recovery, you can end up with a massive bill. Health insurance may cover part of the costs, and you can always get financing to cover the rest, but when it comes to tax time, how can you recoup the costs?

As of right now, there are ways to claim the cost of drug and alcohol rehab on your tax return – as long as you itemize your deductions on Schedule A. In fact, any medical and dental cost is deductible in the same way, as long as it exceeds more than 7.5 percent of your adjusted gross income for the year. For example, if your adjusted gross income is $50,000, you can deduct the expenses that exceed $3750. So if your treatment costs $10,000, then you can deduct $6250.

So which addiction treatment costs are included as acceptable medical expenses that can be deducted? According to §213(d)(1)(A) of the Tax Code, medical costs are defined as “the diagnosis, cure, mitigation, treatment, or prevention of disease.(For the full list of deductible treatments, interventions, etc. go to the Tax Code link above)

Ok, not a lot of guidance in there. The only other directives point out that illegal treatments or operations are not tax deductible and that a few services are definitely included. Some of the ones that relate to drug addiction treatment include x-rays, hospital and nursing services – pretty much any diagnostic, evaluation, and treatment services. If you are enrolled in a drug detox program or a drug addiction treatment program and incur costs for psychological treatment or medical treatment – even an ambulance ride somewhere in the process of healing and getting better – then your costs are covered under the circumstances described above.

Does drug and alcohol addiction qualify as a medical and/ or psychological disease according to the IRS? Absolutely. Even if the general public is split on the question, the medical establishment and the IRS are not. They agree that costs incurred in the treatment of drug addiction is absolutely a medical expense and as such qualifies as a deduction for those who itemize and whose expenses exceed 7.5 percent of their income.

If you would like assistance filing your taxes in a year that you pay for drug and alcohol rehab, tax accountants like this one can help. If you are seeking a drug rehab for yourself or your loved one, Fonthill can help.