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November 1999

Take a medical deduction for smoking cessation programs:
  • Realizing that the Surgeon General's report stated that nicotine is a powerfully addictive drug, and that there is a causal link between smoking and several diseases, the IRS has reversed its long-standing position on the treatment of the costs of smoking cessation programs.

  • You can now include smoking cessation program costs in your itemized medical deductions. These costs, when combined with other medical expenses, are subject to the 7.5%-of-Adjusted Gross Income limitation. This means that the deduction will be applicable only to the portion of taxpayers whose Medical Expenses exceed that 7.5% limit. Non-prescription and over the counter drugs are not deductible, so nonprescription nicotine gum, ejuice and vapes, and certain nicotine patches are not included.

  • This change is retroactive to any open tax year. If you incurred these expense in 1996, 1997, or 1998 you may be eligible for a refund. You should prepare, or have prepared for you, an amended tax return for any of those years in which this ruling might result in a refund.
Non-Profit organizations sometimes have to pay taxes:
  • Many people involved in non-profit organizations are amazed to find that they are not completely tax-exempt. The fact is, your organization may have what the IRS calls "Unrelated Taxable Business Income." Included in this is dividend and interest income, and the Unrelated Taxable Business Income subject to the tax is that which is in excess of $1,000. The tax is levied at the standard corporate tax rate.

  • You pay this tax by filing Form 990T along with your Form 990 or 990EZ. Call our office for further information, or ask the IRS for Publication 598, which explains this tax in more detail.
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