Tax Deductions May Help Fight Obesity

A disease is defined as a sickness of the body or mind. Until recently, obesity was not considered a disease but a self-inflicted, controllable affliction caused by poor lifestyle choices, such as lack of exercise or improper eating habits.

The statistics are staggering. The Centers for Disease Control and Prevention reported that in 1999 and 2000 nearly two-thirds of Americans 20 years of age and older were overweight and almost one-third were obese. The highest percentage of obese men and women were 45 to 74 years old.

Revenue ruling 79-151 disallowed a deduction for participation in a weight-loss program unless it was to cure a specific ailment or disease. At the time obesity was not considered a disease. Since then traditional beliefs have changed. In 1998 the National Heart, Lung, and Blood Institute described obesity as a “complex, multifactorial chronic disease.” In 2000 the Food and Drug Administration said, in the Federal Register, that “obesity is a disease.”

A more significant announcement came in July 2004 when Medicare officials withdrew a previous declaration that obesity was not a disease. Americans on Medicare will no doubt begin to request payments for stomach surgery, diet activities and other obesity-related medical costs. The policy change, therefore, has the potential to significantly influence tax planning for clients who spend money to lose weight.

Revenue ruling 55-261, which deals with medical deductions, said the cost of medical care includes the cost of special food if the food is part of a program to treat illness, is not part of a taxpayer’s normal nutritional needs and a physician documents the need.

In revenue ruling 2002-19, the IRS provided many opportunities for taxpayers to deduct obesity-related costs. Weight-loss programs prescribed by a doctor now are tax-deductible. Also, since obesity may be controlled only through special diets prescribed by a physician and not part of an individual’s normal nutritional needs, the potential exists for a tax deduction for what a taxpayer eats attempting to lose weight under a doctor’s care.

Observation. Published reports show spending by Americans to lose weight may exceed $50 billion annually and that Americans are willing to pay as much as $180 per pound to lose weight. The new tax benefits may be a significant step forward in helping millions of Americans fight and overcome obesity.

CPAs should take an aggressive approach to tax planning for weight-loss spending, looking at every penny clients spend. Everything they eat, drink and do to lose weight should be given strong consideration for a deduction following the guidance in revenue ruling 55-261.

Prepared by W. Terry Dancer, CPA, PhD, associate professor of accounting, Arkansas State University, State University.