Medical Deductions For General Fitness Expenses

Here’s to Your Health!

medical deductions for general fitness expensesWhen Congress raises the hood on the tax code, they’re usually working to raise money to pay for government. But sometimes they’re more interested in nudging us to behave in ways they can’t legislate directly. Take the mortgage interest deduction, for example, which “cost” the Treasury $69.7 billion in 2013. That deduction encourages millions of Americans to spend billions of dollars buying homes, building homes, renovating money pits, and keeping their homes looking spiffy — all of which returns billions more through our overall economy.

Last week, the House Ways and Means Committee passed another one of those “we-know-we-can’t-make-you-do-this-but-we-can-still-give-you-a-tax-break-for-it” laws. The Personal Health Investment Today (“PHIT”) Act would let you take medical deductions for general fitness expenses: gym memberships, exercise classes and personal trainers, sports and fitness equipment, and even pay-to-play school sports fees and race registration fees. (That’s right, your local Thanksgiving “Turkey Trot” 10k will be deductible!) The bill caps the new deduction at $500 for individuals and $1,000 for joint filers.

Here’s the catch. Everyone knows that medical and dental expenses are “deductible.” But look a little closer and you’ll see that code section 213 lets you deduct them only if you itemize, which leaves about 90% of Americans sitting on the bench. And even if you itemize, you can only deduct the amount of expenses over 7.5% of your adjusted gross income. So, on its face, the new deduction won’t mean much.

It turns out, however, that millions of Americans who can’t itemize can still benefit from tax-advantaged flexible spending accounts, medical expense reimbursement plans, and health savings accounts. The bill lets you reimburse PHIT expenses from those accounts.

The Congressional Budget Office estimates the bill would cost the Treasury save taxpayers $3.5 billion over the next decade. That’s enough to get special interests interested. The Wall Street Journal reports that “Fitbit, Inc., the American Heart Association and the American Sports and Fitness Association have all lobbied for the bill.” And Planet Fitness stock climbed more than 4% the day the bill passed.

Of course it wouldn’t be a tax law without a few, ah, provisos, and a couple of quid pro quos. Sorry, golfers . . . hitting the links doesn’t count as “exercise.” Same for hunting, sailing, and horseback riding. And couch potatoes need not apply . . . “qualified sports and fitness expenses” won’t include instructional videos, books, or similar materials.

You’d think a bill attacking America’s expanding waistline would be universally popular. Even potato chip companies can back a law designed to work off calories after they’re eaten. But not everyone is enthusiastic. Leonard Burnham, a former Clinton administration tax official and (apparently) a world-class buzzkill, told the Journal that the benefit would mostly go to high-income families that are already buying gym memberships anyway, and “Every principle of tax policy is violated by this.”

Fortunately for the rest of us, you don’t need to be taking advantage of good policy to save money on taxes. You just need a trainer and a plan. So find some time between trips to the gym to email us, and put your tax bill on an exercise plan!

Photo Credit: Sapper_Designs [Creative Commons CC0], via Creative Commons


Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together.  Most people think of CPAs as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly, and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.