Ask Tax Dad: Doula Deductions, Pension Distributions, And The Sandwich Generation

TAXDADSEZHistorically, our staff Certified Tax Cat has handled readers’ questions about taxes, but he took feline early retirement and hung up his oversized eyeglasses. Filling in for him is Laura’s dad, a retired accountant and real live independent tax preparer. Exclusively on Consumerist, Tax Dad answers your questions.

Will writes:

My son was born last year. My wife used a birth doula [a trained person who provides non-medical care and emotional support to a mother during labor and birth.] Can I claim that as a medical expense? It wasn’t prescribed per se, but my wife’s doctor agreed that he wouldn’t have an issue with it and it could be beneficial for her.

Health insurance wouldn’t cover it so I had to pay it for out of pocket. As for hitting the 10% of AGI [adjusted gross income] in order to claim medical expenses at all, we’re there with this birth, so that’s not an issue. Now I just want to know if I can! I’ve Googled it and find conflicting answers online. Can you help?

In case you are unfamiliar with a birth doula as my health insurance was, here is a good FAQ.

Will,

I cannot find anything from IRS that specifically covers this, but Publication 17 Table 21-1 on medical and dental expenses includes some nursing and support services, but doesn’t include doulas specifically. IRS Publication 502 goes into even more detail on this–but, again, doesn’t include doulas specifically.

Pamala writes:

Would you please explain RMD (required minimum distribution) as it relates to pensions, and how do we know whether we’re meeting the requirements?

Hi Pamala:

Here are the basics. The required minimum distribution rule applies to those who are part of a qualified employee retirement plan, qualified annuity plan, 457 deferred compensation plan, or tax-sheltered annuity plan. If you have not yet started receiving benefits from your plan by April 1 of the year following the year when you reach the age of 70 years and 6 months, you could be penalized for not taking your RMD.

You need to take the entire distribution, or a periodic distribution based on amount and your life expectancy. Your plan administrator should be able to guide you on this.

Greetings Tax Dad! – There’s a provision in the [tax code] that allows penalty free (early) IRA withdrawals if they are done annually over the balance of a lifetime in the form of an annuity. I have not been able to find details on (1) which table to calculate the annuity and (2) how to let the IRS know what I am doing. Do you have any background?

IRS Publication 590 sheds a bit of light on this, but probably you should consult a financial advisor, such as the administrator of your IRA. IRS states that there are 3 approved methods for calculating distributions as an annuity, and you must use one of these approved methods. You also must take at least one distribution annually.

My 84 year old father who has Alzheimer’s and is diabetic moved in with me about a year ago due to his finances being in such turmoil. My other two siblings have pretty much abandoned us in this situation so I am his sole caregiver at the moment.

After some time, I managed to straighten out his fiances and address his health care issues, and I contributed my own cash to help him out of this terrible mess. All that is behind us now and financially he’s able to use his Social Security and pension to cover his basic expenses, bills and health care.

But I still spend a considerable amount of my time addressing his unending needs from a financial such as managing the house he still owns, maintenance, his monthly bills etc. I also manage his health care such as doctor visits, dealing with wicked insurance companies, and private health care workers who help out 2x per week. And I am not rich — I have my own financial responsibilities e.g., a house, kids, & education bills + I can only work part time (for now) until I am able to move him to a special care facility.

My question is, are there ANY tax deductions I can claim or any other tax incentives that could be available for my father for all of my personal time that is spent on him?

Thanks!
Signed, Sandwich Generation
(kids on one side & sick parents on the other & I’m in the middle)

Hi Sandwich: Just know that you are one of a very large under-appreciated group who have the responsibility of caring for elderly parents, just as they once cared for and nurtured you.

You are appreciated. It sounds as if your father is paying for his own support, so you cannot claim him as a dependent. I have heard of care-giver children making arrangements to bill a parent for his/her care services, but you should check with your own accountant or even a lawyer to find out whether that’s an option. It would make you an employee of your father.

The federal and some state governments have proposed stipends or tax deductions for caregivers in your situation. There are none on the federal level, but a New York Congressman proposed yet another earlier this year. Check with an expert on your state’s tax code, if you live in a state with income tax. If you or your accountant find a way, please let Consumerist know.

Disclaimer: The nature of free advice is that you often pretty much get what you pay for. Questions answered in the “Ask Tax Dad” column should not serve as a substitute for consulting a tax preparer, accountant, tax attorney, or certified tax cat of your very own. Tax Dad regrets that he cannot offer advice privately over e-mail.

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  1. CommonC3nts says:

    I think that doula answer was weak.
    “doula” does not mean anything in terms of medical expenses as it is an unregulated hipster term. What matters is what the person you hire is paid to do.

    Are they doing anything that would be considered reimbursable on publication 502?
    If you go by the “doula” definition in the FAQ that the asker posted then a “doula” is NOT deductible.
    “They are there to comfort and support the mother and to enhance communication between the mother and medical professionals.”
    Basically according to the FAQ a “doula” is a paid friend.
    Even if you hire a nurse, any time the nurse spends on doing “personal” things such as in the definition of a “doula” and not “generally considered nursing tasks” is not reimbursable. Again a “doula” according to the FAQ definition and IRS Publication 502 is NOT tax deductible.
    502 is pretty clear about that.
    Even wellness programs are not deductible as medical expenses.
    No diagnostic issue for feell good support= no tax deduction
    Also “You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor” per 502.

    Also if you look on Aetna Insurance’s website they specifically state doula’s are not allowed your healthcare reimbursable expenses which then they for sure will not qualify for a tax deduction.
    “Doula; Expenses associated with a birthing assistant/coach for women in labor are not considered qualified medical expenses.”

    If the person you hire really performs any kind of service that a “nurse” may generally perform then they can be expensed under nursing services criteria.
    There is also another loop hole, if the person you hire is in the context of spirtual support then they can be tax deductible as a christian science practitioner. Since a christian science practitioner is unregulated anyone that can say prayers for you will qualify. It is 100% fair to use this loop hole as they put it in the IRS tax code and they cannot prove you wrong.

    If you word it right you can probably find a legit way to claim the services as a deduction, but calling the person a doula and going by that FAQ then for sure the services are not tax deductible.

    • schwartzster says:

      I was going to respond to the doula thing, too, but this is at least 5000 times better than what I was going to write. Happy tax day!

  2. schwartzster says:

    Sandwich’s dad is living with them, so Sandwich gets to use the fair market value of the lodging when determining whether they provided over half of his support. Sandwich and others in this situation should take a look at IRS Publication 501 to determine if relatives can be claimed as dependents.

    If Sandwich spent a lot of money on the father’s healthcare, the medical expenses deduction might apply.

    And finally, depending on the father’s health and Sandwich’s tax situation, they may be able to take the Child and Dependent Care tax credit.