Posted on July 27, 2005 at 17:09:45:
Let’s say that a parent or other relative with limited income runs up big medical bills. With any luck and filial devotion, the children will fill in, sharing the cost. Who pays and how, though, may determine whether Uncle Sam will help pay the bill.
The key to getting a deduction is that someone who pays more than half the support of a relative—even if the relative has too much income to qualify as a dependent—can deduct medical costs paid for that relative. (Medical bills are considered “support.”)
Even if family members decide to share these costs, it’s smarter to let one person pay the bills—usually the individual in the highest tax bracket who will get the most tax savings for a deduction. Other family members can share the cost by giving tax-free “gifts,” as much as $11,000 from each person, to the bill-payer. The total cost for the parent’s medical bills can be adjusted to allow for the after-tax value of the deduction.