Get A Tax Break For Quitting

Here's another reason to quit smoking: you may get a tax break from the IRS.

The IRS announced it would allow smokers to deduct the cost of programs to help people stop smoking as a medical expense for taxpayers who itemize their returns. Prior to the ruling, the IRS only allowed the deduction if the taxpayer had a smoking related disease.

The IRS based this change on U.S. Surgeon General reports (dating back to 1988) that establish through scientific evidence that nicotine is addictive and that smoking is detrimental to a smoker's health. The IRS last week revoked a 1979 ruling that required a smoking-related ailment to claim the cost of smoking cessation programs.

IRS spokesman Jesse Weller in California said the 1979 ruling was revoked because the IRS recognized that over the years the Surgeon General's report has held that cigarettes contain nicotine, an addictive drug, and another ruling on the books says any expense to stop an addiction is deductible.

"If smoking is an addiction, then a program to help people stop smoking is a legitimate expense," Weller said.

To the IRS, medical care that is considered deductible must involve "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." For the complete explanation of the IRS decision check out Internal Revenue Ruling 99-28.

Taxpayers may also claim the cost of prescription drugs designed to alleviate nicotine withdrawal. But they must be prescription drugs; the over-the-counter nicotine gums and patches don't count.

"Nicotine gum and the patches contain a drug that does not require a prescription and thus can't be deducted," according to Weller. "The good news is, that for smokers who can't quit on their own and want to use an additional program or counseling support, that's deductible," Weller said.

Keep in mind medical expenses that aren't reimbursed by insurance must total exceed 7.5 percent of your adjusted gross income before you may begin to start counting the deduction.

If you used a stop-smoking program in the last three years and already had medical deductions that were near or over the 7.5 percent threshold, you may want to amend your tax return for that year to take advantage of this new ruling.

Check your past returns and the receipts for your smoking cessation program to see if the medical expense would give you some money back. If you want to amend your tax return, get a 1040X. You have three years from the due date of the original return, which is April 15 for most taxpayers. The form is available to download online at the IRS Web page.

Pam MacLean writes about taxes and legal affairs for CBS.MarketWatch.com.

Written By Pam MacLean, CBS MarketWatch