@DoninGA
@vickyvog
I disagree with my colleague, if the facts are as you described. It would be very unusual for your medical expenses to be covered with taxable income by your employer. Most of the time, your expenses are covered by an employer insurance plan, that you pay for with pre-tax deduction from your pay. In this case, insurance reimbursements are not taxable, but you can’t claim a tax deduction for something that was reimbursed with tax free money. Another employer medical reimbursement arrangement is called an HRA, or healthcare reimbursement arrangement. An HRA is an account set up by your employer, that the employee is not allowed to contribute to, that the employee can use to reimburse medical expenses. HRA’s are not taxable, and expenses that are paid with an HRA can’t be used as a tax deduction.
However, you indicate that you were reimbursed with taxable income. This is unusual, but not impossible. This would be treated for payroll purposes as though you were given a raise or a bonus, that is included in your W-2 box 1 taxable income, and is subject to federal, state, Social Security, and Medicare taxes. In this case, it doesn’t matter what the raise or bonus was used for, whether it is used for moving expenses or a performance bonus, or a retention bonus, or to pay for unexpected medical bills. If it is part of your taxable box 1 wages, and you happen to use it for medical expenses, then you can still list those medical expenses as schedule A itemized deductions because you paid them with after-tax money.
