IRS Approves Medical Expense Deduction for Genetic Testing

Genetic testing added to growing list of deductible expenses

In recent years when presented with the opportunity, the Internal Revenue Service (IRS) has identified a number of expenses as qualifying medical expenses for purposes of the itemized deduction for medical expenses or for qualified distributions from health savings accounts or flexible spending accounts. These have included smoking cessation programs, weight loss programs, and gluten-free products for celiac disease. Now, in a private letter ruling, the IRS has spelled out the circumstances under which genetic testing might qualify as a medical expense.

IRS ruling provides evidence on possible treatment of similar situations

While private letter rulings cannot be relied upon by taxpayers other than the taxpayer to whom it was issued, the ruling on genetic testing does indicate the IRS thinking on the matter and how they might treat similar situations:

  • Only the cost of genetic tests directly related to health assessments qualify for the deduction
  • Costs related to ancestry information or other information not related to health would not qualify
  • The IRS ruling may be limited to direct-to-consumer genetic testing kits that have been authorized by the Food and Drug Administration to be marketed as medical devices
  • Health-related information could include testing for predisposition to identified diseases, carrier status of identified diseases, as well as general wellness information and genetic health counselling
  • The provider of the genetic testing may be able to specify the portion of the cost that is considered health related

Expertise is needed when considering deductibility

Federal tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, is available to discuss these developments with respect to genetic testing and qualified medical expenses in general.

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