Can I deduct medical bills paid through a non-taxable settlement?

Asked over 3 years ago - Seattle, WA

I settled last year for a car accident receiving the entire amount as non-taxable pain and suffering, but nearly 8K was paid out to medical bills not covered by my PIP or my private health insurance. Can I gather these bills from my attorney and use them as deductions on my federal return as I had to pay them from my settlement amount?

Attorney answers (5)

  1. Christian K. Lassen II

    Pro

    Contributor Level 20

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    Answered . This is a question for your accountant.

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  2. Douglas Blake Dykes

    Contributor Level 9

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    Answered . I agree you should talk with your CPA or tax preparer for the final answer. While you are preparing to do that, I can offer this thought. I don't understand why the medical bills would still need to be deducted because theoretically the personal injury settlement covered those bills and therefore you are technically not out of pocket anything at this time. Because the government didn't tax you on the personal injury settlement, I don't know how you could get a deduction for the medical bills connected with the medical treatment you received. Finally, I think the answer could be different if your personal injury settlement didn't cover your 8K in out of pocket medical expenses. Again, these are just my thoughts based one tax course in law school and the best answer will come from your tax preparer. Good luck!!

  3. Jeffrey Mark Adams

    Contributor Level 20

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    Answered . you need to speak with your tax specialist.

  4. Jonathan Craig Reed

    Pro

    Contributor Level 16

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    Answered . I do not believe you can deduct medical bills paid as part of a non-taxable settlement. The IRS position will be that the bills were re-imbursed dollar for dollar out of the settlement.

  5. Robert Daniel Kelly

    Pro

    Contributor Level 20

    Answered . I think so.

    Best wishes.

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