A gluten-free lifestyle is not always friendly to your bank account. But if you have celiac disease and fairly high medical expenses you may be able to take advantage of some gluten-free tax deductions.
If it’s too late to meet the paperwork requirements this year and you think you might qualify, it’s never too early to begin preparing for next year.
The IRS allows individuals with celiac disease to deduct the cost difference between gluten-free food and its mainstream equivalent. For instance, if you spend $5 on gluten-free bread, and gluten-containing bread costs $2, you can deduct the difference, $3, as a medical expense on your taxes. You can also deduct the entire cost of special items needed for gluten-free cooking, for example xanthan gum and quinoa flour; the cost of transportation to and from the grocery store for gluten-free purchases; and shipping costs for gluten-free food delivery. File all of these deductions on schedule A of your 1040 tax form.
However, before you can qualify your medical expenses have to exceed a specified threshold. For 2012 you can deduct only the part of your medical expenses that exceeds 7.5 % of your adjusted gross income. Beginning in 2013 it will increase to 10% of your adjusted gross income (7.5% if you are over the age of 65).
It can be difficult to meet the threshold especially if insurance covers most of your medical costs, but if medical expenses are high in a given year it can be worth the effort.
Be prepared with some key documents if you decide to file these deductions:
1. A documented diagnosis of celiac disease from your doctor and a prescription to follow a gluten-free diet. The tax break does not cover those with gluten intolerance or gluten sensitivity.
2. Receipts for every specialty food purchase made throughout the year, for example gluten-free crackers or flour. Naturally gluten-free foods such as produce and meat are not covered. You should also keep receipts for the shipping costs of gluten-free products delivered to your home.
3. An Excel spreadsheet that documents the price of each gluten-free item you purchased, the price of its non-gluten-free equivalent, and the difference between these two numbers. You’ll report the difference on your tax returns.
4. A log of the mileage to and from grocery stores for gluten-free purchases. Be sure to look up the year’s mileage rate and also keep track of any tolls and parking fees.
5. A record of other medical expenses like co-pays and doctor-prescribed supplements not covered by insurance.
While it’s a time-consuming to keep track of receipts and calculate the difference between gluten-free and gluten-containing equivalents, the tax deduction can be valuable in years when you have high medical expenses.
Consult a tax professional if you think it applies to you.