Already need help sticking to your New Year's resolutions? Perhaps you're tired of eating egg-white omelets without bacon. Or maybe the nicotine patch you bought isn't cutting it. Oddly enough, the Internal Revenue Service might be able to help boost your shaky resolve with some welcome tax breaks. "Whether intentional or not, some tax preferences offer incentives for keeping the New Year's resolutions that many of us are making for 2006," says Bob D. Scharin, editor of Warren, Gorham & Lamont/RIA's Practical Tax Strategies, a monthly journal written for tax professionals.
You can only take advantage of some of the tax breaks mentioned in this column if you itemize your tax return. According to the most recent statistics from the IRS, just less than 33 percent of the nation's 129 million individual taxpayers itemize. But other advantages are available to anybody who stumbles across them.
Here are some deductible resolutions:
- Lose weight. Since nearly one out of every three American adults is obese, shedding pounds is always one of the most popular resolutions that is successfully ignored. I can tell that, just by the number of newcomers who show up at my gym every January and then disappear before Valentine's Day.
If you are obese, however, the IRS will consider the cost of a weight-loss program, such as Weight Watchers or Jenny Craig, a medical expense.
The government hasn't bothered to define obesity, so it's up to your physician to decide whether the label fits. Even if you aren't obese, you can claim a weight-loss program as a medical expense if your physician concludes that it would help an existing health problem, such as diabetes or a heart condition.
There is a considerable hurdle, however, to using this medical expense to shrink your tax return. You can only deduct medical costs from your income tax return if they equal at least 7.5 percent of your adjusted gross income. There is a way, though, to wiggle under this hurdle. If you have established a health-care flexible spending account at your workplace, you can use that pretax money to pay for the weight-loss program.
- Quit smoking. If you sign up for a smoking cessation program, it's also considered a deductible medical expense. So you can save by paying for this cost through a workplace health-care account or by meeting the 7.5 percent AGI test.