Allan Rolnick, CPA
When you were young, mom said, “It’s all fun and games until somebody loses an eye.” But now the rules are different. Now, it’s all fun and games until somebody winds up in rehab, as many actors’ and actresses’ lives are upended by various addictions and vices. As one famous singer said, “No, no, no,” and now she’s no longer with us. Rehab is a tax-deductible medical expense if the costs of treatment, along with the rest of your medical expenses, are over 7.5% of your adjusted gross income. You can use Health Savings Account funds or a medical expense reimbursement plan to cover it. But now there’s a new kind of rehab with expensive options that might not pass IRS muster. Last month, Business Insider published a story on high-end crypto rehab centers, where a week’s stay can run 100,000$. You probably didn’t even know crypto trading was an addiction. But some therapists consider it a form of gambling addiction if it meets six tests. Those include salience (it’s the most important thing in the trader’s life); conflict; withdrawal (they experience withdrawal symptoms if they can’t trade); mood modification; tolerance; and relapse. Crypto trading never stops – it’s available 24/7/365. And addicts can chase the dragon from any place in the world with a cellphone or Wi-Fi signal. Castle Craig Hospital in Scotland launched the first crypto rehab program in 2018.
Since then, similar programs have popped up across the world. (It’s just a matter of time before Dr. Phil joins the bandwagon.) And crypto bros, who flaunt the mansions, Bentleys, and jeroboams of Cristal they buy with their gains, don’t seem interested in back-tonature programs that could keep costs down: • The Diamond operates a $25,000 month-long program out of 15 rooms overlooking the Andaman Sea in Phuket, Thailand. Patients enjoy “five clinical psychologists, four clinical addiction counselors, one psychiatrist, 24-7 nursing staff, four clinical support staff, and eight 5-star Thai hospitality staff members.” • The Balance operates ten luxury rehab programs in Mallorca, Zurich, and London. The average patient is a male entrepreneur, age 30-45, who pays $192,000 -$320,000 for a fourweek program that includes a personal manager, a chef, and 70 different therapists. (70!) • Finally, Paracelsus Recovery offers a four-week program, starting at $100,000/week, out of four properties on Lake Geneva with a “private chef and maid, a private client suite within the residence, and a separate suite for a 24- hour live-in therapist.” Here’s the problem. Whatever it is you’re deducting has to be reasonable. Take business meals and entertainment: they’re deductible, but not if they’re lavish or extravagant. If you and your trading partners are celebrating a big score, you’re welcome to take your business discussion to dinner. But the two-buck Chuck drinkers at the IRS will happily disallow your $2,000 bottle of 1989 Mouton Rothschild. When does a villa on Lake Geneva become lavish or extravagant? Does Uncle Sam really need to subsidize a separate suite for your 24-hour therapist? And most important, can you pay for your crypto rehab treatment with crypto? Healthcare currently swallows over 18% of our economy, and that number grows higher every year. Smart tax planning can make it more affordable. And it’s hard to make anything when you’re tucked away in rehab, even if you’re surrounded by 70 therapists. Just let us know how we can help!
Allan J. Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at firstname.lastname@example.org.