Medical expenses are a tax deduction, but not a business deduction. What does that mean? Something I see frequently is business owners paying for their personal medical expenses or their family’s medical expenses with business funds. The thinking is that it’s a tax deduction, so they’ll pay for it as if it is any other tax deductible expense on their business books. What’s wrong with this is that personal or family medical expenses are personal not business expenses. They don’t belong on your business books at all.
Now you ask, how do I get the deduction for medical expenses? The deduction comes on your personal income tax return, form 1040. Ideally, you should be recording medical expenses on your personal books so you can write them off on your 1040.
When clients do pay for medical expenses with business funds, I post it as a draw or distribution. This is the way to post any personal expense paid with business funds.