Celiac.com 05/05/2016 - Frustrated by the process of tracking gluten-free expenses in hopes of using the Canadian government's tax credit, which entitles people with celiac disease to claim the incremental costs, accountant Justin Gravelle has released an app called Celitax, designed to help people with celiac disease easily track their everyday gluten-free purchases.

In Canada, people who are gluten-intolerant, and can provide the government with proof, such as a medical diagnosis of celiac disease, are entitled to the incremental cost difference between gluten-free and non-gluten free products.

However, tracking those expenses over the year can be messy and frustrating. Enter Celitax.

The app is currently available for iPhones, with an Android version to follow. The app digitizes receipts and stores them inside the app, allowing users to review or download them at any time and calculate their gluten-free tax credit in one click.

A user simply takes a photo of their receipt, which is stored in the app for safe keeping. Next, they input their gluten-free purchases into self-created custom categories based on their purchasing habits.

The Canadian government hasn't set average prices for non-gluten-free foods, Gravelle says, so users have to input an estimate themselves so the app can calculate their tax credit.

Still, sounds a lot better than digging through a pile of paper receipts at the end of the year to document your gluten-free expenses.

Would something like this be useful for you?

Source:

• Open Original Shared Link

However, a gluten-free diet can be challenging to follow, inconvenient and expensive. To help reduce costs and make things easier for celiacs, authorities have tried various schemes, including tax reduction, cash transfer, food provision, prescription and subsidies.

But what works best? A team of researchers recently assessed the tax-deductible provisions for a gluten-free diet in Canada compared it with other countries.

The research team included MI Pinto-Sanchez, EF Verdu, MC Gordillo, JC Bai, S Birch, P Moayyedi, and P Bercik. Their recent review highlights advantages and disadvantages in relation to promoting compliance with a gluten-free diet.

The tax offset system used in Canada for gluten-free diet coverage takes the form of a reimbursement for prior food costs. Hence, the program does not help celiac patients reduce the costs of gluten-free foods, it just provides a later refund of a portion of those costs.

In the research team's view, the best approach would lie in subsidizing gluten-free products through controlled vouchers or direct food provision to those who most need it, independent of 'ability or willingness to pay'. Moreover, they suggest, if such a program is too costly, the value of the benefits could be made taxable to ensure that any patient contribution, in terms of additional taxation, is directly tied to the ability to pay.

The team says the limited coverage of Canadians' gluten-free diets is concerning, and suggest that there is a substantial unmet need for gluten-free dietary resources among celiac patients in Canada.

Ultimately the team recommends that the Canadian medical community and the Canadian Celiac Association take a larger role in promoting improved access to gluten-free resources for people with celiac disease.

Source:

• Open Original Shared Link

Celiac.com 02/10/2016 - Can you take a tax deduction for your celiac-related gluten-free purchases? Well, income tax season is upon us once again, and so it's time to brush up on our tax rules.

People with celiac disease can rack up thousands of dollars per year in extra food, medical, and other health-related costs. However, many people who eat gluten-free diets as treatment for celiac disease or other medical conditions may be eligible for tax breaks.

Check out our earlier article on the topic: Are You Due For a Gluten-free Tax Break. Also, check out The Celiac Tax Deduction: What's New? by Howard J. Kass, C.P.A.

Meanwhile, over at Forbes, Todd Ganos has a funny article where he riffs on gluten-free and celiac themes to drive home the point that one-size trusts and asset protection schemes are often not what they claim to be, and many of them are ineffective products aimed at people with less resources. To avoid getting stuck with a poor product, Ganos recommends turning to the Open Original Shared Link and to US case law to best vet the contents of any given asset protection product, especially such names as "The Gluten-Free Impenetrable Castle Asset Protection Trust."

Remember, if you eat a gluten-free diet as treatment for celiac disease or other medical conditions you may be eligible for tax breaks.

First and foremost, we at Celiac.com are neither lawyers, accountants, or tax professionals, and do not give tax advice. So, be sure to check in with the Open Original Shared Link, an accountant or a tax professional for answers to your specific tax questions and challenges. Stay tuned for more as tax season progresses.

Those who do eat gluten-free due to medical conditions will be happy to learn that both the Internal Revenue Service and the Canada Revenue Agency list gluten-free food as an eligible medical expense. That means that filers may be eligible for tax relief for gluten-free-related food expenses.

For example, according to the Canada Revenue Agency website, celiac disease suffers are "entitled to claim the incremental costs associated with the purchase of gluten-free products as a medical expense." That means Canadians with celiac disease can claim the difference between the cost of their gluten-free food and the cost of comparable regular food. However, there are a few hoops to jump through. To claim the credit, Canadian taxpayers need a doctor's letter confirming celiac disease; a receipt for every item claimed; and a summary for each item calculating the cost differential for gluten-free products.

U.S. residents can deduct the extra cost for gluten-free foods and goods purchased to meet celiac dietary needs. Shipping and delivery costs for those gluten-free products can also be deducted. Also, for any special trip to purchase gluten-free foods, the cost of transportation to and from the store is deductible, including mileage, tolls and parking fees. The vehicle deduction for trips during 2013 is 24 cents per mile.

To claim these deductions, taxpayers first need an official, written celiac diagnosis from a doctor. A copy of this diagnosis must be submitted with other completed tax forms.

Taxpayers will then complete form 1040 schedule A for medical deductions. For reference taxpayers may cite: IRS Publication 502; Revenue Rulings: 55-261, 76-80, 2002-19 and 67 TC 481; Cohen 38 TC 387; Flemming TC MEMO 1980 583; and Van Kalb TC MEMO 1978 366

This must be supported with copies of receipts for all gluten-free purchases, along with lists of prices for gluten-free food and regular counterparts being claimed.

The difference between those prices is tax-deductible. For example, if a pound of wheat flour costs $0.60 and a pound of rice flour costs $3.40, then you may deduct $2.80 for each pound of rice flour you are claiming for that tax year.

Remember, some specialty products like xanthan gum and sorghum flour are fully tax-deductible as they have no "regular" counterpart but are purchased to meet your dietary needs.

Of course, for specific advice, contact an accountant.

Sources:

• Open Original Shared Link
• Open Original Shared Link
  
• Celiac.com.

Celiac.com 03/05/2012 - When I first wrote about the tax treatments available to diagnosed Celiacs for the additional costs they incur by following a Gluten-Free diet fifteen years ago, the law was pretty well established and there were no significant changes in the works. The advent of Section 125 plans shortly thereafter, also known as Flexible Spending Arrangements (FSA) added a new twist to the quest for tax deductions. With all the hoopla that has taken place in the last year, both with health care reform and tax legislation, what has changed?

Overview of the Medical Expense Deduction
Before I talk about what has changed, it is important to review the basics of the medical expense deduction and how it relates to the additional costs of following a Gluten-Free diet. Section 213 of the Internal Revenue Code (IRC) provides an itemized deduction for qualified medical expenses incurred. Under present law, medical expenses are deductible to the extent that they exceed 7.5% of Adjusted Gross Income (AGI). AGI is the number shown on the last line of the first page of form 1040.

So, for an individual who has an AGI of $100,000, the “floor” they have to exceed is $7,500 before any of their medical expenses begin to be deductible. If one is in relatively good health and if their employer pays for their health insurance, it is unlikely that one would have enough qualified medical expenses to take the deduction.

The Gluten-Free Component
Now, let’s bring the cost of Gluten-Free food into the equation. Based on a variety of Revenue Rulings and court cases, sufficient precedent has been established for one who has been diagnosed with Celiac Disease (or any other medical condition requiring adherence to a Gluten-Free diet) to claim a medical deduction for the additional costs of following a Gluten-Free diet. I will cite the applicable law at the end of this article.

So, how does one calculate the cost of following the Gluten-Free diet and, equally important, how does one document those costs? Calculating the cost of following the diet is a matter of tracking the costs of purchasing food items that are necessary to the diet and subtracting the costs of comparable non-Gluten-Free versions of the same food. So, for example, if a loaf of Gluten-Free bread costs you $6.00 and a comparable loaf of “regular” bread costs $2.00, the deductible cost of the Gluten-Free bread would be $4.00.

What about those items for which there is no counterpart in the non-Gluten-Free community? One example of this would be Xantham Gum. In that event, the total cost of the product would be deductible.

It’s easy to discuss this process on an item by item basis, but how does one accumulate this data and perform the calculations for a year? First, it is important to collect and retain detailed receipts of every purchase you wish to deduct. You would then need to create a spreadsheet on which to track this data for the year. While I recommend the use of an electronic spreadsheet, pencil and paper will also serve the purpose. If cost is what stands in your way of using a product like Microsoft Excel, check out OpenOffice.org. It is a free Microsoft compatible office suite that should serve your purposes quite well. I would strongly encourage you to collect this data and update your spreadsheet after each shopping trip.

Where do Flexible Spending Arrangements Come In?
As mentioned earlier, depending on the amount of your AGI, you may still not have accumulated enough in deductible medical expenses to be able to take the deduction. However, under current law, if you participate in a Section 125 plan with an FSA and, if your FSA plan allows it, you may be able to reimburse yourself for the additional costs of following a Gluten-Free diet. If you can do that, you have effectively achieved an “above the line” deduction for following the Gluten-Free diet. Similarly, since Health Savings Accounts (HSAs) follow the same rules as FSAs, that may also provide you with an opportunity to get your medical deductions, including the additional costs of observing a Gluten-free diet above the line. For those who are unfamiliar with HSAs, they are only available to those who use them in conjunction with a high-deductible health insurance plan. See your tax advisor for more information or e-mail me with your questions.

Getting back to the discussion on FSAs, however, before you rejoice, there are a couple of caveats to be aware of. First, your 125 plan has to permit this reimbursement. You will need to check with your plan administrator and, perhaps, read the plan document yourself. Be prepared to educate the plan administrator on this issue. Also, after you read the effect that Health Care Reform is going to have on health care expenses in FSAs, you may determine that it isn’t worth the effort. More on that later.

So, What’s Changed?
Two significant changes that will affect one’s ability to deduct the costs of following a Gluten-Free diet are slated to occur in the name of Health Care Reform.

First, the floor for deducting medical expenses is scheduled to increase from 7.5% of AGI to 10% beginning in 2013. If you or your spouse will be age 65 or over at that time, the increase to 10% will take place in 2017. Going back to our example from before, if one has an AGI of $100,000, instead of medical expenses having to exceed a floor of $7,500 to be deductible, they would have to exceed $10,000. This increase would obviously make one think twice about accumulating all the data described earlier!

Another change slated to take place in 2013 would affect the strategy of paying for the costs of following a Gluten-Free diet from an FSA. Beginning in 2013, the maximum amount that could be contributed to a health FSA will be limited to $2,500. There is currently no limit! This cap will reduce the value of paying the costs of following a Gluten-Free diet because doing so will limit the amount available to pay for other health related expenses. Since HSAs are less restrictive, there may be an opportunity here to improve your deduction options.

So, What’s the Bottom Line?
Until the end of 2012, as the law currently stands, it is business as usual in terms of how (if at all) you have been deducting your costs of following a Gluten-Free diet. You must have a diagnosis that requires you to follow a Gluten-Free diet and your costs are potentially deductible as an itemized deduction to the extent they exceed 7.5% of your AGI. If you participate in an FSA, you may be able to pay those expenses through your plan. Check with your plan administrator.

Beginning in 2013, however, the landscape changes. You will have a higher hurdle to overcome to take the itemized deduction and you will be subject to new restrictions in the amounts that can be paid through an FSA. That’s all true as of this writing. As you must certainly be aware, Health Care is a very volatile issue in Washington right now and there are many who believe that it will look very different than it does right now, by the time 2013 rolls around. Congress isn’t done tinkering yet – stay tuned.

Cites to the Law

For those who want to learn more, here are some of the more relevant cites to the tax law:

• §213 of the Internal Revenue Code
• Rev Rul 55-261
• Rev Rul 76-80
• Cohen v. Commissioner, 38 TC 387
• Randolph v. Commissioner, 67 TC 481
• Fleming, TC MEMO 1980 583
• Van Kelb, TC MEMO 1978 366
• §9013(a)-( of the Patient Protection and Affordable Care Act, P.L. 111-148, 3/23/2010
• §125(i)(1) of the Internal Revenue Code as amended by 2010 Health Care Act §10902(a)

The following guidelines were received from the Oct. 1993 CSA/USA National Conference in Buffalo, NY:

1) You can claim only the EXTRA COST of the gluten-free product over what you would pay for the similar item at a grocery store. For example, if wheat flour costs $0.89 per 5 lbs. and rice flour is $3.25 per 5 lbs., the DIFFERENCE of $2.36 is tax deductible. You may also claim mileage expense for the extra trip to the health food store and postal costs on gluten-free products ordered by mail.

2) The cost of xanthan gum (methylcellulose, etc.) used in gluten-free home baked goods is completely different than anything used in an ordinary recipe, so in the opinion of the IRS, the total cost of this item can be claimed.

3) Save all cash register tapes, receipts, and canceled checks to substantiate your gluten-free purchases. You will need to prepare a list of grocery store prices to arrive at the differences in costs. You need not submit it with your return, but do retain it.

4) Attach a letter from your doctor to your tax return. This letter should state that you have Celiac Sprue disease and must adhere to a total gluten-free diet for life.

5) Under MEDICAL DEDUCTIONS list as Extra cost of a gluten-free diet the total amount of your extra expenses. You do not need to itemize these expenses.

Suggestions:

1) You may want to write the Citations (as given below) on your tax return. Always keep a copy of your doctors letter for your own records.

2) Your IRS office may refer you to Publication 17 and tell you these deductions are not permissible. IRS representatives have ruled otherwise and this is applicable throughout the US Refer them to the following Citations:

• Revenue Ruling 55-261
• Cohen 38 TC 387
• Revenue Ruling 76-80, 67 TC 481
• Flemming TC MEMO 1980 583
• Van Kalb TC MEMO 1978 366

Revenue Ruling 76-80 is more on point in that it specifically discusses the deductibility of the additional costs one incurs in purchasing a special form of a product versus the normal cost of the non-special version.

Additionally, if one has to purchase items that they would not otherwise purchase if not for the underlying medical condition (such as xanthan gum) then the full cost of such items are deductible.

It is important to point out that one of the requirements for deducting a medical expense is that the expenditure must be incurred to treat or alleviate a specific medical condition. It is necessary, then, to establish to the IRS that such a medical condition exists. This is best done by a letter of verification from your doctor. This requirement obviously places a celiac in the position of having to obtain a medical diagnosis in order to deduct the additional costs of following a gluten-free diet.

As far as the mechanics of the deduction are concerned, you must first establish the amount of your excess costs associated with the gluten-free diet. This is done by maintaining detailed records of your purchases, as well as maintaining records of comparable normal products, accumulating those costs and subtracting the costs of the normal versions of those products over the tax year in question. The deduction would then be taken as a medical deduction on schedule A of form 1040. To obtain the benefit of the deduction, then, you must first be able to itemize deductions, and you must have enough non-reimbursed medical expenses to exceed the threshold of 7.5% of your Adjusted Gross Income. The amount by which your aggregate medical expenses, including the additional cost of a gluten-free diet, exceed that threshold amount would be deductible.

Does anyone have any experiences or rulings on the legality of deducting as a medical expense the costs for attending a CSA/USA seminar?

IRS publication 502 (Medical and Dental expense handbook) does not give any specific examples for seminars, but they do ok the cost of special schools for medical or physical reasons. I can rationalize the cost of a Celiac seminar as a medical education expense.

According to Internal Revenue Code Section 213, travel expenses that may be deducted are those primarily for and essential to medical care . . .

Regulation 1.213-1(e)(1)(i) defines medical care as the diagnosis, cure, mitigation, treatment, or prevention of disease.

Depending upon how aggressive or conservative one wishes to be, one could interpret this to mean that meetings that educate individuals in the prevention of a disease are expenses incurred in the mitigation or prevention of disease. All of the case law that I saw dealt with travel to warmer climates, not to medical meetings and conventions.

Some practitioners might be inclined to take a somewhat aggressive approach and play the audit lottery, while advising their clients that there is risk in taking the deduction. Before taking a deduction, however, it is only prudent to consult with your tax advisor.

Obviously, this discussion only pertains to taxpayers in the United States.

I understand that this can be quite confusing. My best advice is to contact your tax advisor. I would be willing to answer questions of a general nature. If I dont answer immediately, please be patient. You can E-mail me at: Open Original Shared Link.

I do have the full text of the two Rev. Rulings mentioned above, as well as the two court cases, but the files are large (about 20K each) and I am unsure of what the copyright law allows as far as distributing this information. The materials are copyrighted.

Hope this helps clarify (rather than confuse) some of the tax issues.

In order to take a deduction for medical expenses, the total amount incurred, NET OF INSURANCE REIMBURSEMENTS, must exceed 7.5% of Adjusted Gross Income (AGI). In other words, if a taxpayer (and spouse, if applicable) had AGI of $80,000, they would have to accumulate over $6,000 of out-of-pocket medical expenses before they would realize any benefit at all.

In my practice, the only taxpayers who actually deduct medical expenses, because of the above limitations, are those who pay for their own health insurance, and those who had an extraordinary amount of medical expense that their insurance didnt cover. To summarize, the following individuals should consider compiling and deducting the cost of the gluten-free diet: Those who pay for their own health insurance, and those who had large, uninsured medical bills.

For most everyone else, such an exercise would, most likely, be an exercise in futility.

I hope this is helpful. If you have any questions, e-mail me at: Open Original Shared Link

Howard J. Kass, CPA
Partner, Zinner & Co. LLP
29125 Chagrin Blvd.
Cleveland, OH 44122
Tel: (216) 831-0733
Fax: (216) 765-7118