The Ways and Means of Deducting Payment of a Dependent’s Medical Bills

The Ways and Means of Deducting Payment of a Dependent’s Medical Bills

Medical expenses of all kinds, even for the most benign conditions, can be frightfully expensive.

A trip to the dentist for a simple cleaning leads to a filling and the cost winds up in four figures. An eye exam and a new pair of specs, you’re topping $1,000. The annual checkup, an updated statin prescription or blood pressure medication (we’re preaching to the stressed financial professional choir here) and again, you’re tapping heartily against your credit limits.

Consider what happens when you or a loved one are truly stricken. Even if you have solid health insurance, the bills can turn prohibitive. Some relief comes from the related tax deduction, a benefit that many are curiously lax in claiming. Indeed, many of our clients seem unaware that they can deduct other people’s healthcare costs, even for people who don’t live under their roofs. This opportunity, when available, should never be missed.

Elderly parents and close relatives commonly receive support from loving, younger family members. The latter are usually in their prime working years and able to bear the burden, but even the most prosperous need a break, particularly from the tax collector. There’s certainly no shame in taking the deduction – we’ve had customers express some embarrassment at even broaching the issue – and indeed, it leaves more cash in hand to do a loved one some good.

Clients should be introduced to the concept of qualifying relatives. Naturally, one may deduct their own medical expenses, as well as those of a spouse who is not claiming the expenses on their own return. Parents and grandparents, and any deeper generations if they’re still with us, are also qualifying relatives. Interestingly and surprising for many, in-laws are also eligible, as are step-relatives. Family structures are complex, perhaps exceptionally so today and luckily the law reflects this situation.

A further, often misunderstood factor is that these relatives do not necessarily need to live with you. No matter where they reside, if they meet the criteria and you pay their medical expenses, they qualify.

Non-relatives qualify for tax purposes if they lived with you over the entire tax year in question. Simple residence is not enough: they must live in conditions that define them as essentially a family member. You’ll need to cover more than half of the person’s annual living expenses and they can’t file a joint tax return with anyone else, though there’s an exception clause if they’re doing so to gain a refund. Simple matters can indeed get complicated, and everything must be in conformity with state and local law.

When calculating the cost of support, you can include just about any expense: food, clothes, schooling, a bus pass, health club membership, and of course, medical costs. You can also add the cost of housing, as determined by the fair market price in your area.

Nursing home costs can often be deducted, as can the expense of in-home care. It all depends on the reasons for the care. If your mother lives in a nursing home so she can receive instant treatment for a chronic medical condition, the full cost of the facility can be deducted. If she’s residing at Shady Rest simply to have a nice place to live and her health is good, only the cost of medical care actually administered can be deducted.

Homecare costs are administered in the same way: essential medical expenses are deductible, while assistance with shopping or outings, for example, is not. The key factor is the physical and mental condition of the person in question, so consult the rules carefully with the assistance of a qualified specialist.

For more information, please read:
Here’s How You Can Deduct The Medical Expenses Of Others | Forbes

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