INSIDE THE HEALTH-CARE SYSTEM – MEDICAL DEDUCTIONS—WHAT THE IRS DOESN’T WANT YOU TO KNOW (PART 2)

mistake: Many people fail to claim these tax breaks because they provide less than half of the individual’s income— and so mistakenly assume that they provide less than half of the individual’s support.

key: “Support” includes only amounts that are actually spent on items of support, such as housing, food, clothing and medical care. It does not include income that is saved.

example: A retired parent has a pension and Social Security income, while you pay medical bills for him.

By having the parent save enough income in the bank (by putting money in the bank, he isn’t using the money to pay for support) so that you pay more than 50% of his support in the form of medical payments and other items, you can obtain a deduction for the medical bills.

tactic: When several people together provide most of an individual’s support with no one person paying more than 50%, they can file a multiple support agreement, IRS Form 2120, Multiple Support Declaration, to obtain a dependency exemption and assign it to one member of the group (which can change from year to year), provided he pays more than 10% of support.

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