A hospital’s dermatology department treats both medical and cosmetic skin conditions. Most insurance companies only cover procedures deemed medically necessary. Cosmetic treatments, like wrinkle reduction or elective mole removal, are usually excluded. That’s why many patients see dermatology as expensive.
The Internal Revenue Service (IRS) defines which medical costs qualify as deductible, and insurance companies set their own coverage rules. Hospitals need to follow both to keep billing and administration running smoothly.
This article explains when dermatology is considered a medical expense. We’ll cover the IRS rules, examples of deductible treatments, and the difference between medical and cosmetic dermatology. Finally, we’ll show how SysMD can help practices handle billing and compliance efficiently.
Why Dermatology Can Be a Medical Expense
Insurance companies and the IRS determine which dermatology procedures qualify as medical expenses. Hospitals then communicate these guidelines to patients.
Dermatology counts as a medical expense if:
- A licensed dermatologist prescribes treatment for a medical condition.
- The procedure is necessary to diagnose, treat, or prevent disease.
- The goal is to reduce symptoms like pain, discomfort, or functional impairment.
Examples of covered procedures include:
- Surgery for moles or lesions.
- Treatment for chronic conditions like psoriasis or eczema.
- Acne treatments for severe cases that cause scarring or emotional distress.
- Removal of precancerous or cancerous growths.
- Care for infections or rashes that interfere with daily activities.
These procedures are medically necessary, so insurers typically cover them. Patients may also count these costs toward insurance deductibles and claim them as IRS-approved medical expense deductions.
Understanding Medical Expenses in Dermatology
Medical expenses are costs for diagnosis, treatment, or prevention of disease. In dermatology, this includes office visits, surgeries, lab tests, and prescription medications.
The IRS defines medical expenses as payments for diagnosing, curing, treating, or preventing disease. Within dermatology, services fall into two categories: medical and cosmetic.
- Medical treatments qualify as deductible expenses because they address health conditions.
- Cosmetic treatments are elective and usually excluded from both insurance and tax deductions.
Cosmetic vs. Medical Dermatology
The key distinction is whether a treatment addresses health concerns or appearance only.
Medical Dermatology
Covers conditions that directly affect health, such as:
- Skin cancer treatments.
- Phototherapy for psoriasis.
- Surgical removal of malignant growths.
- Medications for chronic skin diseases.
Both insurers and the IRS recognize these as deductible medical expenses.
Cosmetic Dermatology
Covers procedures done for appearance, not health. Examples:
- Botox injections for wrinkles.
- Chemical peels for skin renewal.
- Laser treatments for pigmentation.
- Mole removal for aesthetic reasons only.
The IRS excludes these from deductible medical expenses, and insurers rarely cover them.
IRS Guidelines on Dermatology Expenses
IRS Publication 502 allows taxpayers to deduct unreimbursed medical expenses that exceed 7.5% of adjusted gross income (AGI).
Dermatology examples:
- Deductible: Skin biopsies, medications, skin cancer surgeries.
- Not deductible: Cosmetic procedures such as wrinkle or scar removal.
If a mole is removed for cancer risk, it’s deductible. If it’s removed purely for cosmetic reasons, it’s not.
Dermatology Treatments That Qualify as Deductible
- Skin cancer screenings & treatments: Biopsies, excisions, chemotherapy.
- Chronic conditions: Eczema, rosacea, psoriasis.
- Severe acne: Prescription medication, phototherapy, or advanced therapies.
- Reconstructive procedures: Surgeries after accidents or burns.
When Dermatology Is Not a Medical Expense
Non-deductible cosmetic procedures include:
- Botox or fillers for aesthetics.
- Cosmetic scar reduction.
- Tattoo or mole removal for appearance.
- Skin “rejuvenation” procedures without medical necessity.
Patients should avoid claiming these as deductions since the IRS specifically excludes them.
Dermatology and Healthcare Tax Write-Offs
Whether a dermatology billing services qualifies as a tax write-off depends on IRS definitions:
- It must be medically necessary.
- It must not be reimbursed by insurance.
- Total unreimbursed medical expenses must exceed 7.5% of AGI.
Example:
If someone earns $60,000 and has $6,000 in qualified medical expenses, they can deduct the portion above $4,500 (7.5% of $60,000). If $2,000 of that is for skin cancer removal or severe acne therapy, those expenses count toward the deduction.
SysMD: Smarter Dermatology Billing
Determining whether a dermatology procedure qualifies as a medical expense requires both medical expertise and precise billing. That’s where SysMD helps. Their team ensures correct coding, accurate claim submission, and full compliance with IRS rules and insurance coverage for dermatology requirements. By reducing claim denials and optimizing billing workflows, SysMD allows dermatology teams to focus on patient care instead of paperwork.
Conclusion
Dermatology is a medical expense when the treatment is medically necessary—such as for skin cancer, chronic conditions, or severe acne. Cosmetic procedures, however, are elective and generally not deductible.
IRS rules allow deductions for unreimbursed medical expenses above 7.5% of AGI, but only if they address health conditions. For practices, accurate billing and documentation are essential to meet payer and IRS requirements. Partnering with SysMD ensures compliance, reduces denials, and improves financial efficiency.
FAQS
Is dermatology considered a medical expense for tax deductions?
Yes, if the treatment is medically necessary, unreimbursed, and meets IRS criteria.
Are cosmetic dermatology procedures tax-deductible?
No, unless the procedure is required for a medical condition (e.g., due to disease, injury, or congenital abnormality).
Can acne treatment be considered a medical expense?
Yes, if the acne is severe or requires prescription medication or specialized therapy.
How does insurance determine if dermatology is covered?
By reviewing medical documentation, CPT codes, and whether the procedure addresses a health condition versus a cosmetic concern.
How does SysMD help with dermatology billing?
By ensuring accurate coding, minimizing denials, and aligning documentation with insurer and IRS requirements.