YOUR TAXES: Q: I rely on homeopathic medicine remedies for a variety of ailments. I have done extensive research on homeopathic medicine, and I often purchase medicine without a prescription.

I have read IRS Publication 17, and it says that medicine cannot be claimed as a tax deduction unless it is prescribed by a doctor. The IRS seems to me to be biased against non-conventional medicine.

Do you agree, or am I misreading the publication?

A: Medical costs can only be deducted if they exceed 7.5 percent of your adjusted gross income. If you don't exceed this threshold you may be needlessly worrying about the tax treatment of your costs.

New Mexico allows a limited deduction for costs not allowed on your federal return, and many employers offer flexible spending accounts that allow an employee to set aside money on a pre-tax basis to be used to reimburse qualifying medical costs.

With that introduction, the tax law allows a variety of medical costs to qualify for a deduction. For example, any amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for affecting any structure or function of the body are deductible.

I'll call this the "first category" of expenses.

Insulin and prescribed medicine and drugs are also deductible. A prescribed drug is one that can only be obtained with a prescription issued by a physician.

If there is a bias in favor of "conventional" medicine, it would be most likely seen in the medicine and drug category. I say this because the first category does not limit treatments to physicians.

In contrast, medicine and drugs must be prescribed by a physician, and that restriction may deny a deduction for much of the homeopathic remedies that you purchase.

The IRS has not, in my view, been biased in interpreting the first category. In a quick and short public ruling more than 30 years ago, the IRS said acupuncture was tax deductible if it met the requirements of the first category. This may seem obvious today, but I don't think acupuncture was considered conventional in the early 1970s.

Yet, the IRS had no problem finding it to be a qualifying medical expense.

Similarly, a husband and wife who lived on the Navajo Reservation in Shiprock were allowed to claim medical deductions for Navajo healing ceremonies called sings. The IRS did not dispute that Navajo sings were tax deductible. Allowed costs included payments to medicine men and costs incurred for baskets and buckskins used in the ceremony.

The Navajo taxpayers lost much of their claimed deductions only because they could not substantiate the costs incurred. Their records proved inaccurate as to dates and payments, and the medical deduction was limited to a reasonable estimate of the costs that were actually incurred.

Alternative medicines, as opposed to treatment costs, can be deducted only if prescribed by a physician licensed to practice by the state. A physician is defined by reference to the Social Security Act and includes a doctor of medicine or osteopathy, a doctor of dental surgery or of dental medicine, a doctor of podiatric medicine, a doctor of optometry, or a chiropractor.

Under the prescription drug definition you may well lose much of the tax benefit for the remedies that you purchase.

Q: My mother is considering a reverse mortgage, and I am researching various aspects for her. The one thing I can't find is whether the interest on the loan would be tax deductible.

A: Generally, tax deductibility of the interest is not a decision factor. There are several reasons for this.

First, many seniors contemplating a reverse mortgage do not itemize deductions and cannot take advantage of residence interest deductions.

Second, the interest on most reverse mortgages is not paid until the home is sold. Interest can't be deducted by a cash-basis taxpayer until it is paid.

The cash method restriction means your mother will not get a current tax benefit for interest added to the loan balance to be paid when the home is sold. When the interest is finally paid it will be deductible, but perhaps only to your mother's estate.

From Helathy.net