Obsessed with discovering all the quirks about your ancestry and what makes you You? Well, then it’s time to get excited because the IRS just made it that much more fun, by allowing a tax break for 23AndMe DNA testing.
Discussed in a private taxpayer letter ruling that later became public, the IRS has expressed that Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) – both used by taxpayers as a way to store up pre-tax income to later spend on health expenses – can now be applied towards 23AndMe’s “Health + Ancestry Service”, which is known for doing medical testing as well as discovering the individual’s heritage.
Admittedly, the ruling, which was published by both Wall Street Journal and the company 23AndMe itself, was in regards to a single taxpayer’s request. But as is the case with most tax issues, what is the case for one, can usually be expected to be the case for all given time.
So, what exactly is eligible for a tax break and why?
“Specifically, 23andMe’s testing services and reports that are eligible are those that are subject to FDA jurisdiction including Health Predisposition, Carrier Status, and Wellness reports,” the company spokesperson writes.
“Since 23andMe doesn’t offer these reports separately from the rest of its Health + Ancestry Service, the IRS provided guidance on how the taxpayer who received the ruling should allocate the amount of their purchase that is medical care. Under this ruling, up to $117.74 of the $199 cost for 23andMe’s Health + Ancestry Service (plus shipping and applicable taxes) is an eligible medical expense.”
In the letter itself, the IRS reiterates their decision:
“On the basis of our analysis of the facts and representations provided, because ancestry services, a non-medical service, must be purchased with health services, we conclude that the price of the DNA collection kit will not be a cost for medical care if only purchased for the ancestry services; however, if the taxpayer also purchases the health services, the price of the DNA collection kit must be allocated between the ancestry services and the health services using a percentage (cost of the health services / cost of ancestry plus health services).”
In light of the development, 23AndMe has come out with a calculating tool to help purchasers understand their tax benefits, as well as making receipts easily available for verification in their FSAs and HSAs, while you can view more information about the ruling here.