This is a question for your accountant.
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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!!
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.
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