17.7 Expenses of Your Dependents

You may deduct your payment of medical bills for your children or other dependents, subject to the AGI floor (17.1). You may deduct the expenses of a person who was your dependent (21.1) either at the time the medical services were provided or at the time you paid the expenses.

In determining dependent status for medical expense purposes, some of the regular exemption tests for dependents (21.1) can be disregarded. If you are unable to claim someone as your dependent for one of the following reasons, you may deduct your payment of medical costs on their behalf: (1) the person is your child who is claimed as a dependent by the other parent under the special rules (21.7) for divorced/separated parents; see below, (2) the person has gross income exceeding the limit for qualifying relatives ($3,800 for 2012), (3) the person files a joint return with their spouse, or (4) you are the dependent of another taxpayer and thus are barred from claiming any dependents on your return. Such a qualifying person must be a U.S. citizen or national, or a resident of the United States, Canada, or Mexico, unless he or she is an adopted child who lives with you. See Examples 1–3 below. A child may not deduct medical expenses paid with his or her parent’s welfare payments; see Example 4 below.

Divorced and separated parents.

You may be able to deduct your payment of your child’s medical costs, even though your ex-spouse is entitled to claim the child as a dependent (21.7). For purposes of a 2012 medical deduction, the child is considered to be the dependent of both you and the child’s other parent if (1)you are divorced or legally separated under a court agreement, separated under a written agreement, or married but living apart during the last six months of 2012; (2) the child was in the custody of one or both of you for more than half of 2012; and (3) together you provided more than half of the child’s 2012 support.

EXAMPLES
1. You contribute more than half of your married son’s support, including a payment of a medical expense of $800. Because he filed a joint return with his wife, you may not claim him as a dependent (21.1). But you still may include your payment of the $800 medical expense with your other qualifying medical expenses since you contributed more than half of his support.
2. Your mother, a U.S. citizen, underwent an operation in November 2011. You paid for the operation in February 2012. You may deduct the cost of the operation in 2012 if you furnished more than one-half of your mother’s support in either 2011 or 2012.
3. Same facts as Example 2, except your mother is a citizen and resident of Italy. You may not deduct the cost of the operation. She is not a U.S. citizen or a resident of the United States, Canada, or Mexico and thus does not qualify as a dependent for exemption purposes (21.8) or for medical deduction purposes.
4. A son is the legal guardian of his mother who is mentally incompetent. As guardian, he received his mother’s state welfare and Social Security benefits, which he deposited in his personal bank account and used to pay part of his mother’s medical expenses. On his tax return, he claimed a deduction for the total medical expenses paid on behalf of his mother. The court held that he could deduct only medical expenses in excess of the amounts received as welfare and Social Security payments. The benefits, to the extent used to pay medical expenses, represented the mother’s payments in her own behalf.

Adopted children.

You may deduct medical expenses of an adopted child if you may claim the child as a dependent either when the medical services are rendered or when you pay the expenses. An adopted child is treated as your child for dependent purposes when a court has approved the adoption or the child is lawfully placed with you for legal adoption.

If you reimburse an adoption agency for medical expenses it paid under an agreement with you, you are considered to have paid the expenses. But if the reimbusement is for medical services that were provided and paid for before you began your adoption negotiations, you may not deduct your payment.

You may not deduct medical expenses for services rendered to the natural mother of the child you adopt.

Multiple support agreements.

If you may claim a person as your dependent under a multiple support agreement (21.6), your unreimbursed payments of that person’s medical expenses are deductible. Even if you may not claim the dependent exception for 2012 because the person has a gross income of $3,800 or more, you may still deduct your payment of medical expenses provided the other multiple support agreement tests are met.

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image Filing Instruction
Multiple Support Agreement
If you may claim a person as your dependent under a multiple support agreement, include with your medical expenses only the amount you actually pay for the dependent’s medical expenses. If you are reimbursed by others who signed the multiple support agreement, you must reduce your deduction by the amount of reimbursement.
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EXAMPLE
Ingrid Fromm and her brother and sister share equally in the support of their mother. Part of their mother’s support includes medical expenses. Should the three of them share in the payment of the bills or should only one of them pay the bills? The answer: Payment should be made by the person who may claim the mother as a dependent under a multiple support agreement. Only that person may deduct the payment. If Ingrid is going to claim her as an exemption, she should pay the bill. She may deduct the payment although she did not contribute more than half of her mother’s support. If her brother and sister reimburse her for part of the bill, she may include only the unreimbursed portion in her medical expenses. Neither Ingrid’s brother nor her sister may deduct this share. Thus, a deduction is lost for these amounts.
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