Is Drug and Alcohol Addiction Rehab Tax-Deductible?

Substance use treatment is sometimes tax-deductible, depending on a few different factors. If you want to learn how you can receive the best help for substance use disorder and which factors would allow treatment to be tax-deductible, consider the following factors:

The Cost of Treatment

Being diagnosed with a substance use disorder is a common challenge, especially considering the potential cost of treatment. There is no doubt that the rehab cost can be expensive, and this is an even bigger challenge when the substance use disorder interferes with your ability to maintain a comfortable income.

You may wonder if the treatment expenses are deductible and if you can get reimbursed for paying out-of-pocket costs. Fortunately, many insurance companies will cover some of the costs and show you how to write off the expenses on your taxes. If your costs are deductible, the cost of rehab can lessen the burden of taxes. A few factors may affect whether the option is available to you.

Deduction of Medical Expenses Through the IRS

The amount of taxes owed each year varies depending on your deductions and income. When you pay too much to the government the previous year, you will receive a refund. If you paid too little, you may be expected to owe money to the IRS. When you use a tax deduction, you lower the amount of money you are required to pay for those taxes.

If you would like to lower the financial burden of substance abuse treatment, consider talking to a tax professional about how to deduct your rehab costs from your taxes. A professional should help you understand how to deduct certain medical expenses and figure out which aspects of your substance use treatment costs count as deductible medical expenses. 

Keep in mind that whether an expense is considered as tax-deductible by the IRS depends on what facility, treatment options, and amenities you choose.

The Benefit of Deductions

Tax deductions are a great way to help you lower the amount of money you owe to the government. They are divided into multiple categories, and one is medical expenses. If you want your tax liability to be lower and you have paid for substance use treatment, deducting that payment might save you money and ease the financial burden of treatment.

Which Expenses Are Deductible?

Whether medical expenses are deductible on taxes or covered by insurance can vary depending on the type of treatment received, the need, and the facility that provided it. Substance use treatment is usually considered a medical expense or cost that can be deducted. It is more likely to be considered a deductible medical expense if its costs are 7.5% of your income. You may need to itemize the deductions using your Schedule A form for your taxes.

The main aspects of substance use treatment costs that may be tax-deductible include payments for:

• the diagnosis

• mitigation

• treatment

• insurance premiums

Other potentially deductible expenses that you may not have considered include psychiatrist and psychologist fees or the expense of transportation and parking at a medical facility. Other substance abuse expenses that you may want to claim on your taxes are bills for:

• physical therapy

• pharmacy refills

• CT or MRI scans

• legal fees

• pain management

• specialty services

• off-site treatments

Remember that deductions can include costs for you, your loved one, or an eligible dependent.

How to Deduct Medical Expenses

To take advantage of the financial relief offered in the form of tax deductions, you must follow the rules of the IRS to recoup any out-of-pocket expenditure. The first step is to itemize all of your expenses, and the second is to calculate the allowable amount. 

To enumerate the deductions, you will have to fill out a Schedule A form when filing your taxes. Again, a tax professional is excellent at handling all of the deductions and itemizing. They will walk you through the tax-deductible process with little to no stress on your behalf.

Do not forget any potentially deductible expenses. In addition to those listed in the section above, you might be able to claim the cost of lodging, prescriptions, and meals if they were part of a treatment plan. When you itemize your medical expenses, think about your hospital visits, blood work, diagnosis, and medical tests. It greatly helps to keep all your receipts in case they can be deductible on your taxes next year.

There are a few additional deductions you may wish to consider. Costs for childcare, toiletries, health savings accounts, gym memberships, or future medical expenses are also considerations in the deductions.

To learn more about what is and what is not tax-deductible, check out the IRS guidelines or speak with a tax professional or financial advisor today.

The Forge Recovery Center Can Help You Determine If You Can Afford Rehab

The cost of substance use treatment can feel overwhelming. However, there are resources available to lower the financial burden of addiction recovery treatment. Getting a verification of your insurance benefits enables you to understand how much cost you may or may not have to pay out of pocket.

Talking to your insurance provider or having someone help you with the insurance can be a great start to making your financial plan. A tax professional can also help you figure out which costs associated with substance use treatment are tax-deductible and how you can receive these deductions.

Speaking with your addiction center is another important step in estimating your costs and making a game plan for recovery. For more information about how you can lower the financial burden of substance use treatment, reach out to The Forge Recovery Center today.

Written by

Brian Moore

Content Writer

Reviewed by

Jeremy Arzt

Chief Clinical Officer

May 26, 2022