Many American taxpayers undergo clinical procedures to correct vision problems. The most common in today’s medical environment is laser eye surgery, commonly called Lasik.
Taxpayers cannot deduct the cost of cosmetic surgery unless the procedure is necessary to correct a deformity from a congenital abnormality, personal injury or disease—and the question of whether Lasik is a cosmetic procedure is open for discussion. IRC section 213(d)(1)(a) defines medical care expenses as amounts paid for the “diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Clearly, laser eye surgery affects a structure or a function of the body and its purpose is to correct a physical defect.
Although there is no revenue ruling concerning the deductibility of laser eye surgery, the IRS did issue a letter ruling (9625049) addressing whether radial keratotomy (RK)—a predecessor of laser eye surgery—was deductible under section 213. Today, RK has been replaced almost entirely by Lasik, which is used in about 95% of the surgical procedures to correct nearsightedness, farsightedness and astigmatism.
Letter ruling 9625049 defined RK as “a surgical procedure that involves making small incisions in the cornea radiating outward from the central area.” The ruling also focused on Treasury regulations section 1.213-1(e)(1)(ic), which says, “Medical care includes operations or treatments, including surgery, affecting any structure or function of the body, which is primarily undertaken for prevention or alleviation of a physical or mental defect or illness.”
The letter ruling said that under the facts presented, RK was a surgical procedure that affected a structure or function of the body, its purpose was to correct a physical defect and it was not cosmetic surgery. Thus the procedure was deductible under section 213.
Observation. Absent a specific ruling on the deductibility of laser eye surgery, all of the evidence, including the definition of medical care costs and the letter ruling, would lead CPAs to believe the costs are indeed deductible. The reason the IRS hasn’t issued a ruling is perhaps because few if any taxpayers are taking deductions for the cost of Lasik.
Each year hundreds of thousands of Americans have laser eye surgery costing as much as $3,000 an eye. Deducting its cost may help taxpayers overcome the 7.5% of adjusted gross income (AGI) limitation for unreimbursed medical expenses, especially when married couples who both need the surgery do it in the same year. Where possible CPAs can recommend taxpayers bunch their medical expenses to generate substantial tax savings.
Prepared by W. Terry Dancer, PhD, associate professor of accounting, Arkansas State University, State University.