Friday, April 16, 2010

UPDATE: Special Food for Allergies IS Tax-Deductible (Corrected)

I just got off the phone with my tax lady, and she says that along with the gluten-free stuff, any food product used because of allergies (with a doctor's note specifying the requirement) is tax-deductible as a medical expense. The deductibility only covers the cost difference between the ordinary version of the product sold in grocery stores, and the product you buy for your use.

Example: NoMato, a tomato-free tomato "sauce", sells in my health food store for about $6.00/ 16-oz. jar. I'm allergic to tomatoes.

Regular 16-oz. cans of tomato sauce sell for $1.50 (I'm guessing here--I haven't bought tomato sauce in years)

The difference? a proposed $4.50/jar deductible. Of that, .34 misses the deduction, making the total deduction = $4.16/jar.

$6.00 (original cost) - $4.16 (deductible cost) = $1.84 (new cost per jar out-of-pocket)

I buy this stuff by the case--12 jars at a time. The price difference between Nomato and regular tomato sauce adds up to roughly $54.00/case. The 7.5% medical expenses deduction floor comes to $4.05/case in ineligible writeoffs, leaving $49.95 to deduct--my case price just dropped from $72.00 to $22.05, courtesy of Uncle Sam.

$72.00 (original price) - $18.00 (estimated price of tomato sauce case) = $54.00

$54.00 (price difference) X 7.5% (medical deduction floor) = $4.05 ineligible tax deduction amount

$54.00 (price difference) - $4.05 (ineligible deduction) = $49.95 (new case price to deduct, leaving me to pay $22.05 out of pocket)

Not bad for no sales, no coupons, no manufacturer rebates, and no huge quantities available!

Another example: Guar gum, made by Bob's Red Mill, sells for $3.34/8 oz. bag. Guar gum and/or xanthan gum is specifically used by Celiacs--our GF flours don't contain gluten, and these gums act as a gluten substitute to make baked goods rise.

Guar gum/xanthan gum isn't sold in grocery stores, so the amount of this product past 7.5% is deductible. I imagine millet, amaranth, teff, brown rice, and coconut flours would also be 92.5% deductible, since these are also not normally carried in regular grocery stores.

Guess who's going to start keeping track of her grocery spending, and comparing the deductions vs. the sheltering of HSA contributions? This means I can buy these specific groceries with HSA money (tax free), then turn around and deduct them from my taxes as a medical expense--a quick call to my tax lady CONFIRMS it!

Sadly, she says gardening expenses are NOT deductible, unless I make a business out of it.

Now I know the importance of getting diagnosed Celiac. I gotta see my doctor. I could have been filling my pantry for far less than I did. I also need a different sort of price book--one that tracks prices of regular foods vs. allergen-free foods. I smell a Dollar Stretcher on the lookout for it in the coming weeks.

Now, not only is most of my food 92.5% tax deductible, but it can be bought with HSA pre-tax dollars at the same time. Thanks, H & R Block!


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