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Deducting the cost of laser eye surgery.


Many American taxpayers undergo clinical procedures to correct vision problems. The most common in today's medical environment is laser eye surgery, commonly called Lasik.

Taxpayers cannot deduct the cost of cosmetic surgery unless the procedure is necessary to correct a deformity from a congenital abnormality, personal injury or disease--and the question of whether Lasik is a cosmetic procedure is open for discussion. IRC section 213 (d) (1) (a) defines medical care expenses as amounts paid for the "diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." Clearly, laser eye surgery affects a structure or a function of the body and its purpose is to correct a physical defect.

Although there is no revenue ruling concerning the deductibility of laser eye surgery, the IRS did issue a letter ruling (9625049) addressing whether radial keratotomy
radial keratotomy  a series of incisions made in the cornea from its outer edge toward its center in spokelike fashion; done to flatten the cornea and thus to correct myopia.


ker·a·tot·o·my (kr
 (RK RK - Komi Republic (Russia)
RK - Radial Keratectomy
RK - Radial Keratotomy
RK - Radio Kaštela (Kaštela, Croatia)
RK - Raj Kapoor (Indian actor)
RK - Rajni Kanth (actor)
RK - Reaction Kinetic
RK - Redlich Kwong (Thermodynamic Equation)
RK - Relient K (band)
RK - Repair Kit
RK - Rich Kid
RK - Rilo Kiley (band)
RK - Road Kill
RK - Roadkill
RK - Robert Kelly (rapper)
RK - Röda Korset (Swedish Red Cross)
)--a predecessor of laser eye surgery--was deductible under section 213. Today, RK has been replaced almost entirely by Lasik, which is used in about 95% of the surgical procedures to correct nearsightedness, farsightedness and astigmatism.

Letter ruling 9625049 defined RK as "a surgical procedure that involves making small incisions in the cornea radiating outward from the central area." The ruling also focused on Treasury regulations section 1.213-1(e)(1)(ic), which says, "Medical care includes operations or treatments, including surgery, affecting any structure or function of the body, which is primarily undertaken for prevention or alleviation of a physical or mental defect or illness."

The letter ruling said that under the facts presented, RK was a surgical procedure that affected a structure or function of the body, its purpose was to correct a physical defect and it was not cosmetic surgery. Thus the procedure was deductible under section 213.

Observation. Absent a specific ruling on the deductibility of laser eye surgery, all of the evidence, including the definition of medical care costs and the letter ruling, would lead CPAs to believe the costs are indeed deductible. The reason the IRS hasn't issued a ruling is perhaps because few if any taxpayers are taking deductions for the cost of Lasik.

Each year hundreds of thousands of Americans have laser eye surgery costing as much as $3,000 an eye. Deducting its cost may help taxpayers overcome the 7.5% of adjusted gross income (AGI) limitation for un-reimbursed medical expenses, especially when married couples who both need the surgery do it in the same year. Where possible CPAs can recommend taxpayers bunch their medical expenses to generate substantial tax savings.

Opt to Adopt

Uncle Sam increased the adoption credit
Adoption Credit
A per-child tax credit for adopting a child under 18.

Notes:
The limit is higher if it's determined that the adopted child has special needs.
See also: Child Tax Credit, Earned Income Credit, Education IRA, Exempt Income, Exemption, Expense, Qualified Adoption Expenses, Tax Credit
 to $10,390 for

2004 from $10,160 in 2003.

Source: IRS www.irs.gov.

Steer Clear of the Dirty Dozen

The IRS is aggressively pursuing and prosecuting promoters of these 12 common tax scams--and many of their clients--fraud and tax evasion
Tax Evasion
An illegal practice whereby an individual intentionally avoids paying their true tax liability. Anyone caught evading taxes is generally subject to criminal charges and substantial penalties.

Notes:
There is a difference between tax minimization and tax evasion. All citizens have the right to reduce the amount of taxes they pay as long as it is by legal means.
See also: Tax Haven, Tax Liability, Tax Shelter
.

* Misuse of trusts.

* "Claim of right" doctrine.

* Offshore transactions.

* Employment tax evasion.

* Return-prepare fraud.

* Americas With Disabilities Act.

* Special tax refunds for African Americans

* Improper home-based business.

* Frivolous Arguments.

* Identity theft.

* Sharing EITC EITC - Earned Income Tax Credit
EITC - Eastern Idaho Technical College
EITC - Electro/Information Technology Conference
EITC - Engineering Inspection Technical Committee (United Kingdom)
 dependents.

Prepared by W. Terry Dancer, PhD, associate professor of accounting, Arkansas State University Arkansas State University, at Jonesboro; coeducational; chartered 1909; named State Agricultural and Mechanical College, 1925–33. In 1933 the school became Arkansas State College, and in 1967 it achieved university status and adopted its present name. State University
COPYRIGHT 2004 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2004, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Article Details
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Author:Dancer, W. Terry
Publication:Journal of Accountancy
Date:Dec 1, 2004
Words:525
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