December 2, 2022
  • December 2, 2022

Pay medical bills

By on February 17, 2022 0

Yesterday, a customer called in a panic. Her daughter was on a trip overseas and while visiting a rainforest reserve, her daughter slipped, fell 30ft and hit her head. Her daughter was in a coma. My client desperately wanted to get her home and get her to the best neurologists as soon as possible. There was an air ambulance service, but her daughter’s health insurance only covered half the cost of the service; and, the service would only take cash, which my client did not have readily available. In sharing this news, two disparate forces emerged to bring her daughter home: a generous family friend and Section 2503(e) of the Internal Revenue Code.

In this case, my client had a good friend who had the cash available. After an avalanche of documents, the funds were transferred directly to the air ambulance service. As I write this, the girl, still in a coma, is in the air and on her way back to the United States. In these scenarios, time is of the essence, quick funding for the air ambulance service, and the will of a family friend makes all the difference.

Section 2503(e) of the Internal Revenue Code states that gift tax does not apply to amounts paid by an individual, on behalf of another individual, if paid directly to a vendor medical care (or to a medical insurance provider) in payment for that medical care or insurance. This gift tax exemption is in addition to the annual gift tax exclusion ($16,000 per person in 2022) and the amount is not capped, unlike the medical deductions you take on your tax returns. of income. This exemption applies regardless of the relationship between the donor and the donee.

So if you know someone who is having a medical or financial crisis, keep in mind that you can cover their medical expenses or their health insurance premium, by paying those expenses directly to the medical service provider or company. insurance; and, you won’t have to pay gift tax to do so. Who said the taxman had no heart? In this case, not me.