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What to deduct when you're expecting

Kelly Phillips Erb is a tax attorney in the greater Philadelphia, PA area, where she focuses on tax law for businesses and families. She is also a freelance author and writer.

Kelly has published Ask the TaxGirl: Everything Parents Sh...

What's tax deductible and what's not

Having a baby can be expensive. Fortunately, taxpayers can catch a few breaks under the Tax Code to make it a little more bearable.
Pregnant woman
Pregnancy and taxes

What's tax deductible and what's not

Having a baby can be expensive. Fortunately, taxpayers can catch a few breaks under the Tax Code to make it a little more bearable.

The Internal Revenue Service allows a deduction for medical expenses for taxpayers who itemize on a Schedule A. The deduction is limited to those qualifying medical expenses that are greater than 7.5 percent of your adjusted gross income (AGI, found at line 37 of your federal income tax return). Take note: The percentage will increase to 10 percent for most taxpayers in 2013.

Here’s a quick example for the 2012 tax year. Let’s say your AGI is $20,000 and you have qualifying medical expenses of $5,000. Your deduction is limited to $3,500, or $5,000 less ($20,000 x 7.5 percent).

What are qualifying medical expenses? Generally, qualifying medical expenses include those for the “diagnosis, cure, mitigation, treatment or prevention of disease and the costs for treatments affecting any part or function of the body.”

Doctor's visits

If you are pregnant, you can count on lots of doctor visits. The cost of your doctor visits is deductible to the extent that you pay out of pocket; any costs that are reimbursed to you or are paid by your insurer are not deductible.

Also deductible? The cost of getting to and from those visits, whether by car, public transit or taxi — as is parking. You’ll need to be able to document these expenses, so get receipts and keep good records (a mileage log is particularly helpful if you drive to medical appointments).

Tests

You can also count on lots of testing, including blood tests and glucose tolerance tests. These tests, even though they are largely considered preventive care (which is generally not deductible by IRS), are also deductible so long as they are ordered by your doctor as part of your prenatal care. Similarly, testing to determine potential birth defects or other abnormalities, including maternal serum tests, hCG testing, chorionic villus sampling, or amniocentesis are deductible.

During the later stages of pregnancy and during labor, your doctor may order fetal heart monitoring to check the rate and rhythm of the fetal heartbeat. Again, so long as these tests are ordered by a doctor for medical reasons, they are deductible.

Ultrasounds

Your doctor will also usually schedule an ultrasound between 18 to 20 weeks to check the growth of the baby, location of the placenta and determine any potential problems. The cost of this ultrasound, to the extent not covered by health insurance, would be deductible as a medical expense.

Around that same 18- to 20-week mark, it’s also sometimes possible to determine the gender of your baby. Of course, depending upon how cooperative the baby is, the ultrasound may be inconclusive. Since most medical professionals will only prescribe an ultrasound when medically necessary, it’s generally unlikely that your doctor will schedule another ultrasound simply to determine the gender.

Some parents are, however, pretty anxious to determine the gender and may schedule a private ultrasound outside of their regular medical care. If it is not a necessary part of prenatal care, you may not deduct the cost of a private ultrasound. The same rule applies to those extra ultrasounds, such as the 4-D ultrasound, which parents request for purposes of fun or photos. The key to deductibility is whether the ultrasound is prescribed as medically necessary.

Maternity clothes

As your pregnancy progresses and you get bigger, you’re going to need more clothes. Even though maternity clothes are a necessary part of being pregnant, they are specifically excluded as a deduction by the IRS.

Extra help

You may also find, as your pregnancy progresses, that you are in need of extra assistance around the house. You cannot deduct the cost of household help even if such help is recommended by a doctor; it’s considered a personal expense that is not deductible. However, to the extent that your doctor orders nursing care for you in house, those expenses are deductible.

And despite the obvious dilemma facing parents of small children while having another baby, you cannot include in medical expenses amounts you pay for the care of children, even if those expenses are strictly to allow you to go the doctor or to the hospital for medical care.

Childbirth classes

You can deduct the cost of getting ready to have your baby if you attend childbirth classes. Again, to the extent that you are reimbursed by your insurance company (many will give you a refund if you attend so many classes), you must exclude the reimbursement from your overall medical expenses.

Supplies

What about supplies for your new baby? Effective as of the 2010 tax year, the IRS has ruled that taxpayers may use pretax dollars in their FSAs (flexible spending accounts) to cover the cost of breastfeeding supplies. If you don’t have an FSA, breastfeeding supplies are considered deductible as a medical expense. Breastfeeding supplies, or “supplies that assist lactation” include breast pumps, bottles and pads.

However, be careful: Infant formula is not deductible, even if you can’t (or don’t wish to) breastfeed. The IRS considers infant formula to be nutrition, like food for grown-ups, and therefore, not deductible.

Other supplies like diapers (or the cost of a diaper service), lotions and baby shampoo are likewise not deductible. They are considered personal supplies.

And of course, once you go into labor, the cost of the hospital stay, doctor and nursing care, medications, ultrasounds and other monitoring are medical expenses for the purpose of claiming a deduction. If you opt to use a birthing center, the same rules apply.

At the end, you have a little bundle of joy... and an extra personal exemption!

More about family finances

Affording a baby
Tips for adding to your child's college fund
The kiddie tax: Does your child have to file?

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