Important Information Regarding Medical Expenses!

Dear Parent, 

As we approach FAFSA renewal time, here is some important information for you to know.

To be able to deduct medical expenses on your federal tax return, your family must have expenses in excess of 7.5% of their AGI.  However, college financial aid guidelines are not necessarily as strict.  Some families who do not qualify under federal tax law just assume they will not qualify under the financial aid rules either, so they enter ‘0’ for their medical expenses when it comes to financial aid forms.  This can be a costly mistake!

Here is a quick example.  Let’s say a family’s adjusted gross income is $50,000 and they had medical expenses of $3,000.  As far as the IRS is concerned, the family would not get a medical deduction.  The $3,000 of medical bills falls short of 7.5% of $50,000 ($3,750).  However, under the financial aid formulas, the family may indeed receive a deduction against income.  Under the Federal Methodology, the financial aid officers can use their discretion for this item.  Under the Institutional Methodology, the rules for this expense category are more defined.

Therefore, even if the family does not have enough medical and dental expenses to qualify under the federal tax law, they should not assume that it would be a waste of time to disclose these figures.  Many colleges are using the Institutional Methodology which will make an allowance for un-reimbursed medical expenses in excess of 3.5% of the family’s income.  If the family is filing out the Profile form, there is a place on the form to report this information.  Many of the schools’ separate financial aid forms ask for this information as well.

What constitutes a medical expense?  Here are just a few:  doctors, dentists, prescription eyeglasses, therapists, health insurance premiums that were deducted from a paycheck or paid personally, medical transportation and lodging. 

If your un-reimbursed medical expenses are in excess of 3.5% of your family’s income, please be sure to forward that information to us. 

Until next month…Best Wishes!

Randy Stoltz, President