Deductions

[tfga]

My wife was in the hospital from 11/23 until 5/24 when she passed. I have bills with services from 2023 that I paid in 2024. Do allowable deductions for medical go by date of service or payment? Also, there are insurance policies for her that were claimed. Are the policy settlements reportable?

[Opus 17]

Medical bills are deductible on your tax return when the provider is paid.  (That means that if you paid the provider with a credit card in 2023, and paid off the card in 2024, it would be a 2023 deduction.)

You should not take a deduction for any expense that was covered by insurance.

Insurance payments are not taxable income unless you previously took a deduction for an expense that was later reimbursed.  In that case, you have a reimbursement of a previous deduction, and you need to use the tax benefit rule to determine if the reimbursement is taxable.  We can give you more details about that if needed. 

[AmyC]

1. Medical bills go by the date of payment.

2. Medical policies for reimbursement are not taxable income but they reduce the amount you are allowed to claim. If you had other policies, such as cancer insurance, that was paid with after tax dollars, there is no taxable income.

[tfga]

You say no deductions if covered by insurance. What if the insurance didn't cover 100% (80/20, 75/25, deductible not met, etc.) I have close to $10k that came out of pocket. She had cancer in 2011 and the following year we claimed those deductions under the same scenario claiming the portion we paid out (our portion of what insurance didn't pay).

[Opus 17]

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@tfga wrote:

You say no deductions if covered by insurance. What if the insurance didn't cover 100% (80/20, 75/25, deductible not met, etc.) I have close to $10k that came out of pocket. She had cancer in 2011 and the following year we claimed those deductions under the same scenario claiming the portion we paid out (our portion of what insurance didn't pay).

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Any out of pocket costs are allowable deductions (co-pays, not eligible for reimbursement, etc.)