Some families may wonder if cloth diapers qualify as a medical expense and IRS Publication 502 (2013), Medical and Dental Expenses can be clear as mud.
Here are some highlights from the publication:
“If, for a taxable year, you itemize your deductions on Form 1040, Schedule A (PDF), you may be able to deduct expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. For years beginning after December 31, 2012, you may deduct only the amount by which your total medical expenses exceed 10% of your adjusted gross income or 7.5% if you or your spouse is 65 or older. The 7.5% limitation is a temporary exemption from January 1, 2013 to December 31, 2016 for individuals age 65 and older and their spouses. You figure the amount you are allowed to deduct on Form 1040, Schedule A. For more information, see Questions and Answers: 2013 Changes to the Itemized Deduction for Medical Expenses.”
“Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.” (emphasis added)
The IRS specifically mentions diapers:
“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.” (emphasis added)
I believe this is what some families are looking at when considering deducting cloth diapers as a medical expense.
The IRS also states:
“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. For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense.
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. 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.” (emphasis added)
On to the tax professionals’ opinions.
“Don’t deduct unless child is older, handicapped or you run a day care. Normal baby supplies for your own child are usually not deductible. Rare exceptions.” Linda de Marlor, President, Tax-Masters, Inc.
My take away: If you had a child with special needs using diapers beyond the normal age range, diapers could potentially be deducted. If you had a daycare business and purchased diapers provided for children in your care, you may be able to deduct that expense on your schedule C.
“Generally, I can tell you this:
1. To be deductible, any med exp must be for the treatment of a condition or malady of the human body. Thus, there has to be some specific diagnosed problem that is expressly treated by the item or substance taken. For example, a heart condition that’s treated by taking specific heart meds.
2. Therefore, you would not be able to deduct cloth diapers that merely “are better for you” than disposables.
3. The disposables must cause some specific problem — rash, allergies, infection, etc. — that is prevented or ameliorated by the cloth diapers.
4. The condition would have to be diagnosed and the cloth diapers prescribed or recommend by a health care professional.
5. You would have to document all your purchases and the cost of cleaning, etc., with receipts, credit card bills or checks.
6. You can claim med expenses only to the extent that they exceed 10% of adjusted gross income. Thus, if AGI is $45,000, your expenses must exceed $4,500, and then ONLY the portion that does exceed $4,500 is deductible.” – Dan Pilla, Tax Help Online. Mr. Pilla is an Enrolled Agent and admitted to practice before the U.S. Tax Court. He has 33 yrs of experience in defending taxpayers and has written 13 books on IRS audit defense and taxpayers’ rights issues.
Another point of view:
“In order for medical expenses to be deductible as per IRC 213, it must not be reimbursed by insurance and must be ‘for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.’ Therefore, if a physician has diagnosed a condition that which requires cloth diapers as part of the treatment, mitigation, or prevention of the disease then it is likely a deductible expense.” – Senen Garcia, Esq.
SG Law Group, tax preparer for over 13 years and licensed attorney.
One last expert opinion:
“Cloth diapers wouldn’t be an appropriate medical expense. If it was written off, it would be a problem during an audit.
However, how it could work, is if the family has an HSA, they can use their HSA debit card and that’s valid since it’s OTC and for health.” Nicole Wright, Wright Financials. Wright is acclaimed as a tax and finance expert holding the following credentials: CHt, MHt, AHt, ABt, Rev, CRM, EFTP, NLPP.
Ms. Wright makes a great point about Health Savings Accounts (HSAs), particularly since expenses must exceed 10% of your AGI to deduct on your income tax return. However, in order to use HSA funds, the purchase must be a qualified medical expense.
Here is information from HSA Finder on What Does NOT Qualify
These expenses are just a sampling of expenses you can’t pay for with your HSA. (If you do pay for these with a withdrawal from your HSA, you’ll either have to reimburse the account by April 14 th of the year following the tax year or pay income tax — plus a 10% penalty tax — on the withdrawal amount.)
- Cosmetic surgery (unless the surgery is related to a medical condition, as in the case of a birth defect or a mastectomy)
- Teeth whitening
- Maternity clothes
- Diaper services
- Health club dues
- Electrolysis for hair removal
- Hair transplants
- Household help or babysitting
- Marijuana for glaucoma (or other controlled substances)
- Nonprescription drugs and medicines (over-the-counter drugs can be qualifying expenses, but you must have a doctor’s written recommendation)
- Food supplements not prescribed by a doctor (e.g., Ensure TM.)
- Over-the-counter vitamins or diet drinks (e.g., Slimfast)
- Swimming lessons
- Weight-loss programs not prescribed
- Funeral expenses
This is about as clear as the rest of the info, so I decided to also call the IRS. We went through all of the questions about filing status and method, income, that the diapers were medically necessary for a dependent’s diagnosed medical condition. (I have to mention how wonderful and helpful the person I spoke with was, even when I said this was all hypothetical!) After about 27 minutes on the phone, she came back on the line and said “at this point we are going to say that the cloth diapers do qualify as a…” and my phone hung up and said “call failed.” D’oh! You cannot call back and reach the same person so I would have to start this over again to get the rest of the answer.
I do know that your total medical expenses would need to exceed 10% of your adjusted gross income in order to deduct them. What I don’t know is whether the cloth diapers would be wholly deductible at that point (assuming your other medical expenses already exceeded 10% of your AGI), or only the amount by which the cost of cloth exceeded the cost of disposables. Nor whether there would be a limitation on your spending (e.g. buying 100 WAHM made fitteds and a dozen wool covers.) I also do not know what documentation you’d need to have (is a Doctor’s recommendation sufficient, or would you need a specific medical diagnosis? What medical diagnoses would qualify? Eczema? Something more serious?)
Please note that I’m not a tax professional and I am not providing tax advice. However, if you think you may qualify to deduct the cost of your cloth diapers, I highly recommend that you call the IRS toll free, Monday through Friday, 7 AM to 7 PM (your local time) at 1-800-829-1040. If you give them the specifics of your personal situation, they will be able to guide you. Be certain to keep detailed receipts, a record of your phone call to the IRS (they can provide you with their ID number so you can have a record of who you spoke to), your child’s medical records, and be ready to justify and explain the expenses if you were to be audited.
Have you deducted cloth diapers as a medical expense, or would you consider doing so?