Posted by Unifirst Financials & Tax Advisors

How to Deduct Other People's Medical Expenses

How to Deduct Other People's Medical Expenses

Medical costs can slightly reduce one's budget, especially in the event of an unforeseen emergency not fully covered by insurance. The Internal Revenue Service grants taxpayers some exemption, which makes some of these expenses partially tax-deductible. To benefit from this tax deduction, you need to know what counts as medical bills and how to claim the deduction.

In this article, I'm going to show you how to deduct another person's medical bills, including someone who doesn't live with you—other elderly parents.

You can deduct medical expenses paid by you, your spouse, or someone who was your dependent at the time. Although you may no longer receive exemptions based on our tax returns, the definition of a dependent continues to be used in this situation and other circumstances.

A dependent is a child or other qualified parent.

Qualified family members cover a wide variety. These include brothers and sisters and half-brothers and all their children. Parents and your ancestors are also involved. Your stepfather and in-laws also qualify.

A parent does not have to live with you during the year to qualify as a dependent.

A person who is not a parent is considered dependent when they have lived with you all year as a family member, and the relationship has not violated by local law.

To be your dependent, a person cannot file a joint return with another person, except to request a reimbursement.

Another qualification for a dependent is that, whether or not the dependent is a parent, you ought to have provided more than half of his/her support during the year. Support includes accommodation costs, such as medical expenses, clothing, education, accommodation, recreation, and transportation. If the person lives with you, the correct rental price from the real estate market is included in the book value.

Therefore, if you contribute to the medical expenses of parents, siblings, or children (including parents and family members), you can deduct these expenses.

These rules often come into play when a caregiver needs medical or long-term care, usually the parent. All or part of the costs of a nursing home or assisted living can be deducted depending on the reason for the residence and the type of care received. Even help provided to your home or dependent can be tax-deductible.

When the main reason for living in a nursing home is a physical condition and the need for medical care, the total cost of housing is deductible. However, if health care is not the primary reason for living in a nursing home, especially if the resident requires attention, only the specific costs of health and medical care will be deductible. In this case, payments for the board, lodging, and other personal expenses are not deductible.

Reducing the costs of assisted living or home care is more complicated, as an assisted or residential residence is primarily a residential center, not a medical center. The deductions are more limited for residents who can perform at least five of the six activities of daily living; eating, going to the bathroom, moving, washing, dressing, and greeting each other. These people only deduct a portion of the costs directly for health care or other health care.

However, when the assisted resident cannot perform two or more daily activities, the total cost of the facility can be deducted if he has a continuing care plan. A doctor, nurse, or physiotherapist can develop a care plan.

Take, for instance, the case of "Estate of Lillian Baral, 137 T.C. n.1, 2011": During the trial, a patient suffered from a chronic illness caused by dementia, and the doctor believed that health workers needed 24 hours a day for medical and safety reasons. Since the patient had a pre-established care plan, and the doctor believed that her limited capacity required caregivers, the tax court decided that payments to caregivers could be deductible as medical bills. 

Usually, a health care provider itemizes the bills so you can see the costs of health care were and the costs of personal care.

The cost of care provided in the patient's home, including care provided by family members, may be deductible. Treatment must be medically necessary or due to medical conditions. When a parent assists, there must be a written contract describing the assistance that will be provided and the corresponding compensation. Payment must be reasonable for the support provided, and the paid individual must be qualified to assist.

Without a written contract specifying the details, the IRS will assume that a caring parent does so without waiting for payment.

There can be a lot of money at stake, especially when you are helping to meet the family or long-term care needs of a family member. It may be helpful to review the rules with a tax advisor.

Unifirst Financials & Tax Advisors
Contact This Member