Medical expenses & Dependency

[Taxadvisor VA]

Below is a current scenario that just popped up yesterday. Has anybody run across something like this? I would appreciate your read on it.

Married couple has a daughter who will be 25 this year. She graduated from College in 2013 and moved out on her own. Unfortunately, she has been diagnosed with late stage Lyme disease. She had to move back home because this disease is debilitating in many ways. In 2015, she has already earned $20K. She has paid already $8K in out of pocket medical bills because her insurance company (Industry does not cover expenses related to this disease- sad travesty) does not cover these expenses.
Her parents will be paying for the extremely high medical expenses out of pocket.
1) Tax Book section 4-5 2nd column- TP can deduct medical expenses paid for an individual who would have been a dependent except that she received gross income of $4,000 in 2015. This is the situation that I am referring to above. Am I correct saying that these medical expenses can be deducted by her parents? _____________

Dependency deduction- Since she is older than 23, not an F/T student, and made more than $4,000 in 2015, it would appear that she cannot be claimed as a dependent. By year’s end 2015, parents will have provided more than half her support (Medical expenses monthly are estimated at $6-$7K). Can they claim her as a dependent? _____________
In 2016, it would be a no brainer because the daughter would be unable to work unless her condition greatly improves.

Thanks for your input and advice.

Doug

[ATSMAN]

Below is a current scenario that just popped up yesterday. Has anybody run across something like this? I would appreciate your read on it.

Married couple has a daughter who will be 25 this year. She graduated from College in 2013 and moved out on her own. Unfortunately, she has been diagnosed with late stage Lyme disease. She had to move back home because this disease is debilitating in many ways. In 2015, she has already earned $20K. She has paid already $8K in out of pocket medical bills because her insurance company (Industry does not cover expenses related to this disease- sad travesty) does not cover these expenses.
Her parents will be paying for the extremely high medical expenses out of pocket.
1) Tax Book section 4-5 2nd column- TP can deduct medical expenses paid for an individual who would have been a dependent except that she received gross income of $4,000 in 2015. This is the situation that I am referring to above. Am I correct saying that these medical expenses can be deducted by her parents? _____________

Dependency deduction- Since she is older than 23, not an F/T student, and made more than $4,000 in 2015, it would appear that she cannot be claimed as a dependent. By year’s end 2015, parents will have provided more than half her support (Medical expenses monthly are estimated at $6-$7K). Can they claim her as a dependent? _____________
In 2016, it would be a no brainer because the daughter would be unable to work unless her condition greatly improves.

Thanks for your input and advice.

Doug

If all the other dependency tests are satisfied except for the gross income test then I believe the parent can deduct the qualified medical deduction.

Pub. 502. 2014, page 4.

[Taxadvisor VA]

Medical Deduction- Yes- Dependency Deduction Questionable????

If all the other dependency tests are satisfied except for the gross income test then I believe the parent can deduct the qualified medical deduction.

Pub. 502. 2014, page 4.

ATSMAN:
Thank you for your response. All other dependency tests are satisfied so I agree parents have a basis to claim out of pocket medical expenses.

Dependency- By end of year, parents will have clearly paid more than half her support. Are we stuck, since single daughter made more than $4,000 in wages from claiming her as a dependent on parents joint return? _______________

Thanks again,
Taxadvisor VA

[TAXNJ]

Pay direct to doctors

Believe if not dependent if parents Pay bills direct to doctors, etc. it may be deductible. But you have to do research to verify it can be done

[Taxadvisor VA]

Pay Direct Response

Believe if not dependent if parents Pay bills direct to doctors, etc. it may be deductible. But you have to do research to verify it can be done

Thanks so much for responding.

See Section 4-5 Tax Book 1040 Edition Plus; Second column upper right where it says: "Taxpayers can deduct medical expenses paid for an individual who would have been a dependent except that single daughter received gross income of $4,000 or more in 2015. I added the last part to personalize it for the situation that I'm reviewing.
I think we are on solid ground to deduct medical expenses paid by parents b/c single daughter meets all the other tests to be claimed as a dependent except gross income.

Thanks again,
Taxadvisor VA

[New York Enrolled Agent]

Below is a current scenario that just popped up yesterday. Has anybody run across something like this? I would appreciate your read on it.

Married couple has a daughter who will be 25 this year. She graduated from College in 2013 and moved out on her own. Unfortunately, she has been diagnosed with late stage Lyme disease. She had to move back home because this disease is debilitating in many ways. In 2015, she has already earned $20K. She has paid already $8K in out of pocket medical bills because her insurance company (Industry does not cover expenses related to this disease- sad travesty) does not cover these expenses.
Her parents will be paying for the extremely high medical expenses out of pocket.
1) Tax Book section 4-5 2nd column- TP can deduct medical expenses paid for an individual who would have been a dependent except that she received gross income of $4,000 in 2015. This is the situation that I am referring to above. Am I correct saying that these medical expenses can be deducted by her parents? _____________

Dependency deduction- Since she is older than 23, not an F/T student, and made more than $4,000 in 2015, it would appear that she cannot be claimed as a dependent. By year’s end 2015, parents will have provided more than half her support (Medical expenses monthly are estimated at $6-$7K). Can they claim her as a dependent? _____________

Might be easier to ask the second question first. She is not a dependent - clearly not a qualifying child and also not a qualifying relative due to the fact she can't pass the gross income test in §152(d)(1)(B).

Now to the first question - you are correct - the parents can take the medical expenses as a deduction if the only problem is the gross income test. §213(a) allows the deduction for a dependent determined without regard to §152(d)(1)(B).

[taxea]

If Dr signs a disability form she qualifies as their dependent, otherwise qualifies as other dependent. Was the income earned before she became ill? I agree that the expenses would be deductible if paid directly to medical facility.

[Roland Slugg]

It's rarely necessary, or even possible to add anything meaningful to one of NYEA's posts. In this case I only wish to add, for emphasis, a comment about the daughter qualifying as a dependent except for the fact that she earned more than the personal exemption amount ... $4,000 this year. One of the qualifying requirements for someone to be a dependent is the taxpayer claiming someone as a dependent must provide more than half the person's support (except in multiple support situations). The income earned by the daughter ... $20,000 according to the OP ... will likely be deemed to have been spent on her own support, so that will be the approximate starting point from which to make the "more than half" determination.

[TAXNJ]

Sec. 213(a)

Might be easier to ask the second question first. She is not a dependent - clearly not a qualifying child and also not a qualifying relative due to the fact she can't pass the gross income test in §152(d)(1)(B).

Now to the first question - you are correct - the parents can take the medical expenses as a deduction if the only problem is the gross income test. §213(a) allows the deduction for a dependent determined without regard to §152(d)(1)(B).

R. Slugg's post raises interesting concerns.

Your reference of sec. 213(a), what specific sec. 213(a); sub sections, apply to this scenario to support parents taking medical deduction and would the allowable deductions include the payments made by the daughter or only payments made by parents specifically paid to the medical providers?

See link below:

https://www.law.cornell.edu/uscode/text/26/213

Thanks in advance.