IRS Allows Medical Expense Deduction for COVID PPE
If you have bought personal protective equipment (PPE) during the pandemic, you may be able to deduct those expenses on your tax return. Alternatively, you may choose to reimburse yourself with funds from a tax-advantaged medical savings plan. Eligible PPE includes sterile gloves, face masks and shields, and hand sanitizer and sanitizing wipes, as long as these items were purchased primarily to prevent the spread of coronavirus.
The IRS recently confirmed that taxpayers who itemize deductions may deduct the cost of COVID-related PPE as a medical expense. You may generally only deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI).
For example, since 7.5% of $40,000 is $3,000, a couple with an AGI of $40,000 could not deduct their first $3,000 of medical expenses. However, if their unreimbursed medical expenses plus the cost of PPE total $5,000, they claim a $2,000 deduction ($5,000 – $3,000) if they itemize.
Although IRS is allowing PPE as medical expense, to list these expenses as an itemized deduction on your tax return, your total medical expenses, including PPE must still exceed 7.5% of your adjusted gross income for the year of 2020.
If you do not claim the itemized tax deduction on your return and you have a qualified medical savings plan, you may reimburse yourself for eligible PPE costs. Qualified plans may include health flexible spending arrangements (FSAs), health savings accounts (HSAs) and Archer MSAs.
Just remember that reimbursed medical expenses cannot be claimed as tax deductions. In other words, you may EITHER claim a tax deduction for your coronavirus PPE expenses OR use your qualified medical savings plan to reimburse yourself, but not both. A tax professional can help you determine which tax strategy works out better for you.