I can find info on what medical expenses are deductible and how much, but I can’t find an answer that fits my situation. Can I deduct an eligible medical expense if someone gave me the money to pay it? It wasn’t a loan, it was a gift.
I’m okay with using a tax accountant, but I’d rather save the money and keep using TurboTax.
Anybody know? Or know where in the tax code I can find the answer?
TurboTax will handle this just fine, as far as I know.
For the recipient, gifts are not taxed, so the source of the funds is irrelevant. In our lovely US system it’s the donor who has tax consequences; gifts are essentially a transfer of estate. Sorta makes sense, I guess. You (the recipient) may deduct medical expenses as you ordinarily would without regard to where you got the money to pay them.
On the donor side, a donor can pay your medical (and tuition, I think) expenses directly without occurring any tax consequences. If the donor gives you the money instead, the donor must report (for 2009) any amount over $13,000, and the amount over $13,000 will count toward their lifetime ceiling for estate transfer.
Details are much more complicated than I’ve outlined here, but the CP only pays taxes; he never actually understands them, so my little summary here is worth about what you paid for it.
Note that you cannot have someone else pay the medical bill directly and then also deduct it as your own personal expense…
Oh yeah; one other thing. Never pay a large medical bill with your own cash without pleading poverty and negotiating down the amount with the hospital. In our crazy medical system, no large payor ever pays full ticket, so what you see as your end bill will be heavily discounted, on average, if they know your insurance is not covering it. Just sayin’…
I am not aware of any requirement to report a gift as income. Do you have a source for this information? Of course if a gift then produces income to the donee, that income does need to be reported (at the bracket level of the donee).
A gift is not taxable for the recipient. Period. It is not included as a source of income and whether or not a gift was received has no bearing on whether an individual may itemize and deduct a medical expense. I could receive a gift of one million dollars and still itemize a medical expense of any amount; the million dollars would not figure into my income at all.
This is also not correct. A third party who pays a medical expense directly may not deduct it as their personal expense. Paying someone else’s medical expense is simply a non-taxable gift (non-taxable to either the giver or receiver); paying it does not sort of “buy” the deduction for the third party who pays the bill.
In fact, gifting money for medical expenses is one of the exceptions to the $12,000 per year maximum exclusion.
Of course, even a gift over the exclusion amount and not excluded for another reason is not subject to gift tax until the total amount a person has given exceeds $1 million (in their lifetime). At that point, gift tax is owed by the giver. Not the recipient. And, regardless of gift tax, it is never taxable income to the recipient.
The giver could only try to claim a deduction for the medical expenses if they can also claim the recipient as a dependent. (Parents claim medical expenses for their kids all the time. It’s possible for the OP’s son to claim the OP as a dependent if a laundry list of other conditions are met).
The recipient can still claim the medical deduction even if they use money received as a gift to pay the expenses. Some tax professionals split hairs over whether money paid to the hospital directly denies the deduction to both parties, but I’d include the deduction and fight the auditor to keep it (if it came to that).