Sunday, April 18, 2010

Widening a Tax Code Loophole--Using Deductible Food as Medical Expense

I've been doing some calculations and price comparisons (my feet hurt from running all over the grocery store!), and I've found that you can widen this loophole, i.e., game the system, by buying the most expensive special deductible foods for yourself, while choosing the cheapest sources of regular grocery store counterparts for price comparison, making the gap between the two wider, and thus subjecting more of a price difference for deduction calculations.

Example: coconut milk vs. coconut milk

"Tarzan" brand organic coconut milk (in a health food store) costs $1.60/can, while a generic counterpart in the grocery store costs $1.69/can. There would be no write-off because the health food store can is cheaper (organic vs. commercial is not deductible). Had I not been able to find a coconut milk in this particular grocery store, I would have had to use regular condensed, sweetened milk instead for a comparison, making a price difference the other way, and creating a deduction for myself.

"Bells & Whistles" brand organic coconut milk (in a health food store) costs $2.30/can, while the generic counterpart from above costs $1.69/can--the price difference is .61, of which 7.5% of it (.05) is non-deductible, leaving .56/can deductible and bringing my out-of-pocket costs for this coconut milk down to $1.74/can, courtesy of Uncle Sam. No store sales, and no coupons necessary for that savings!

I've also discovered that my case quantity discount from the health food store isn't helping me here--the individual product price is higher than the case quantity price, AND just the fact that I'm a member entitles me to as much as a 20% discount, which means I may be cutting my deduction possibilities by half or more simply by buying in case lot with the membership discount.

Example: Individually-bought Bells & Whistles coconut milk (12 cans) @$2.30 each = $27.60

Case-quantity Bells & Whistles coconut milk (12 cans) = $23.00/case

I'm losing out on a $4.60 deduction addition in price difference with Bells & Whistles coconut milk in case quantity vs. individually-bought at shelf price. That's an extra $4.60 that could go toward the price difference between B & W coconut milk vs. generic store-bought individual cans. If I spend at least 20% more on the stuff I buy in quantity (losing my discount), I can make up that gap.

It gets worse: The price difference between individually-bought cans of B & W coconut milk vs. store-bought generic coconut milk (using the example above) = $7.32 Using that price difference of $7.32 X 7.5% (non-deductible) or .55 = $6.77 deductible for 12 separate cans.

The price difference in a a box-bound case quantity of the same 12 cans of B & W coconut milk vs. the 12 store-bought cans = $3.72 Multiply that times the 7.5% non-deductible (.28) = $3.44/case deductible (basically 12 cans in a shallow box with plastic wrap around it).

12 individual cans yields a $6.77 deduction, but a box-bound case of the exact same cans yields a $3.44 deduction. $6.77 - $3.44 = $3.33 in lost deduction money.

I'm cutting my deduction potential IN HALF just by buying in discounted case quantity! Could that other 50% be going toward the extra packaging? I wonder.

It seems the higher the price for the intended product, and the bigger the price difference vs. grocery store finds (if any), the bigger the deduction amount.

Also, I have to have more than 7.5% of my adjusted gross income to be able to write off any of this--only the portion OVER the 7.5% floor is deductible. I estimate I'd have to spend over $1900/year on this stuff just to begin to be able to write it off. Everything under that amount wouldn't be enough to qualify for deductions.

I'm going to have to switch to more expensive deductible products to offset my membership discount benefits--this way, the wholesaler and retailer aren't losing money by giving me the 20% discount, but I get a 24-25% discount from Uncle Sam. If I get good enough at this, I can deduct more on Hubby's W-4 to account for the extra expense and extra refund, making this a complete wash in the end. Add this to the tax-sheltering potential of buying qualifying special groceries through an HSA account, and I could actually get paid to be so allergic!

So, I should buy the most expensive food substitutes at the health food store, and use the cheapest grocery store prices I can find as comparisons. This is how I can widen the loophole for myself. It's a shame I have to go to such lengths just to avoid future food inflation, as well as avoid constantly having to run to a doctor for allergy relief--this is what the HCR law has come to, only people don't know it yet. People will continue to eat poorly, claiming REAL FOOD too expensive, thus feeding an already-corrupt health insurance system. Remember: a doctor a day keeps the apples away.

This is surely an unintended consequence Congress didn't account for--how could they? Nobody read the damned bill and/or thought that far ahead!

So far, my biggest deduction-makers in price difference have been NoMato "tomato sauce" and NoNuts Pea Butter.

Maybe this is my reward for taking the initiative to stay healthy.

I don't think I'll embark on this loophole-widening project until my crops come in--that way, I'll have more money to spend on the more expensive foods. The money I would've been spending buying vegetation can go toward buying more expensive (or just more) deductible foods. THIS is how a garden can assist in tax deduction creation, offsetting the pending potential disaster of the HCR unintended consequence!

If one day the tax code would allow for the price difference between commercially-fed meat vs. grass-fed organic meat solely because the animals are being fed stuff I'm allergic to (like certain grains), or because Hubby's allergic to soy (yes, commercial market animals DO get fed soy), I'd be in hog heaven (pun intended) with tax deductions just in price difference between commercial meat vs. organic grass-fed meat! Alas--our government may not recognize secondary sources (what the animals eat) for human food allergies yet.

I think I'm going to call H & R Block on this one--they've got a year-round office here in town. I'll keep you posted.


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