Tax Deduction for Medical Expenses

[RobsChica]

Last year the U.S. Tax Court determined a taxpayer can deduct the amount of medical expenses paid on their behalf by someone else when those expenses are paid directly to the medical provider. For some of you this may be worth filing an amended tax return; keep it in mind for next year as well.

'The facts of the case demonstrated that the mother intended the payments, which were paid directly to the medical-service providers and local government, to be gifts. Therefore, the Tax Court characterized the transactions as gifts from the mother to the daughter, followed by payment of the expenses by the daughter using those gifted funds. The daughter was allowed to count nearly $25,000 of medical expenses that were actually paid by the mother, plus some expenses the daughter paid with her own funds, in calculating her medical-expense deduction.
Thanks to the tax-law exemption for gifts that are made in the form of direct payments to medical-service providers, the mother's payment of the medical expenses had no federal gift tax consequences for her.
Important Point: When you directly pay medical expenses for a person who is your dependent (meaning you pay over 50% of that person's total support), you can add the expenses you pay for the dependent to your own expenses and claim a deduction for the total to the extent it exceeds 7.5% of your adjusted gross income. In the Tax Court case, the daughter was evidently not the mother's dependent, so the deduction for the daughter's expenses belonged to the daughter rather than the mother. '

[PretaniVirago]

So, just to see if I understand you correctly, in the case of my surro she should be able to claim any expenses I paid directly to our clinic and the monitoring clinic for her care and also any insurance deductable that I will pay (if she needs hospital services) towards HER insurance coverage, etc.
Would that work for transfer fees at the hospital, pharmacy costs, etc if everything is under HER name (they just know to come to me to pay the bills)?

[RobsChica]

So, just to see if I understand you correctly, in the case of my surro she should be able to claim any expenses I paid directly to our clinic and the monitoring clinic for her care and also any insurance deductable that I will pay (if she needs hospital services) towards HER insurance coverage, etc.
Would that work for transfer fees at the hospital, pharmacy costs, etc if everything is under HER name (they just know to come to me to pay the bills)?

That's how I understand it; she'd keep receipts to show you paid the bill in HER name. Double check about the insurance, though, as they're not providing a medical service, per se, only coverage.
And even though the comp you pay can be treated as a 'gift' for tax purposes this would not; ergo, it won't be counted against that gift amount.
If I were a surro who paid ANY Federal income taxes for a year in which I did a surrogacy I'd file an amended return; that's a chunk of money they're deserved back.

[LexKalMommy]

Thanks, Tamara!

[Chasinyourheart]

Deleting because I re-read it and understood it, then posted that I understood but that obviously was clear as mud too. ;)

[RobsChica]

It also says in there that the person has to be a dependent right? Meaning the IPs would have to pay more than 50% of the surrogate's support, which comp doesn't come close to that for some. Or is the write off for the child in utero's support/medical bills? I'm confused... doesn't take much with tax/government jargon though.

Nm I understand. If you support someone you can write off the medical expenses.

No, it's for when you're NOT their dependent, otherwise they'd have the deduction. The case was a daughter (not her mother's dependent) whose mother paid her medical bills. The daughter got the deduction, not the mother, as she wasn't the mother's dependent.

You're welcome, Jodie; there's no good reason for anyone to pay more taxes than they owe and I say this as someone whose livelihood is tied to taxpayer funds. As much money as gets wasted (that I see w/ my own eyes) by the federal gov't you should keep as much in your pocket as legally allowed.

[Chasinyourheart]

I realized that, I should have deleted my initial response rather than just adding to it. Thanks

[RobsChica]

I know most of you have done your taxes, but for future reference here's the IRS document showing what's deductible and what's not.

[TxMom]

Thanks Interesting list, stuff I never would've imagine.

Not on topic at all but I really want to rescue that guy out of that plastic wrap lol I think it's Tom Hanks?

[RobsChica]

Thanks Interesting list, stuff I never would've imagine.

Not on topic at all but I really want to rescue that guy out of that plastic wrap lol I think it's Tom Hanks?

Good eye, it IS Tom Hanks! The joke is that he's obviously capable of freeing himself, yet he struggles as though he cannot. It's a clip from an SNL Celebrity Jeopardy where his cameo* was funnier than most of the entire shows have been for a few years.

Bonus points for guessing the other cameo actor in this clip.

[Rebekah Rose]

Bonus points for guessing the other cameo actor in this clip.

Norm Macdonald as Burt Reynolds?

[RobsChica]

Norm Macdonald as Burt Reynolds?

Well done you! He's a scream, Norm.