Medical payment gifting when above the annual exclusion gift amount

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slamfire
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Joined: Thu Mar 30, 2017 7:35 am

Medical payment gifting when above the annual exclusion gift amount

Post by slamfire » Mon Oct 30, 2017 9:19 am

I have gifted the maximum annual exclusion amount ($14,000) to my adult children this year but would also like to pay for their qualified medical expenses. However, I am never physically present when they need to pay qualified medical expenses that are due at the time of service. This prevents me from being able to pay many of their medical bills.

Are my adult children allowed to use my credit card to pay for authorized medical expenses? I would setup the credit card where I am the primary account holder (I pay the bill) and my adult children are secondary authorized users.

Is this allowed? Would this be a gray area for the IRS?

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CAsage
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Joined: Sun Mar 27, 2016 6:25 pm

Re: Medical payment gifting when above the annual exclusion gift amount

Post by CAsage » Mon Oct 30, 2017 9:25 am

You certainly can add your children as authorized users to your credit card; I believe they get cards in their own names. And a quick search of the IRS indicates that medical expenses are permitted above $14,000 per year. See instructions for Form 709.

https://irs.gov/instructions/i709

Medical exclusion. The gift tax does not apply to an amount you paid on behalf of an individual to a person or institution that provided medical care for the individual. The payment must be to the care provider. The medical care must meet the requirements of section 213(d) (definition of medical care for income tax deduction purposes). Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual.
The medical exclusion does not apply to amounts paid for medical care that are reimbursed by the donee's insurance. If payment for a medical expense is reimbursed by the donee's insurance company, your payment for that expense, to the extent of the reimbursed amount, is not eligible for the medical exclusion and you are considered to have made a gift to the donee of the reimbursed amount.
To the extent that the payment was for something other than medical care, it is a gift to the individual on whose behalf the payment was made and may be offset by the annual exclusion if it is otherwise available.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

bberris
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Re: Medical payment gifting when above the annual exclusion gift amount

Post by bberris » Mon Oct 30, 2017 10:25 am

They can use your credit card with your permission even if they are not authorized users. Of course, the provider need not accept that, or any, card. I would not add children as authorized users because the credit utilization will damage their credit rating. Even if you pay off the card each month, if a creditor pulls their file while the balance is big, their score will be hurt.

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CAsage
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Re: Medical payment gifting when above the annual exclusion gift amount

Post by CAsage » Mon Oct 30, 2017 2:45 pm

Credit impact can go both ways (and if it was my parents, I would be so happy for the cash help....):

https://creditkarma.com/credit-card ... edit-card/

If the primary account holder has a strong history of on-time payments, this can have a positive impact on your credit. Additionally, if the account’s credit utilization rate is low, this can also be good for your credit. You can figure out your utilization rate by dividing your total credit card balances by your total credit card limits.
On the other hand, if the primary account holder misses a payment on the card, your credit can take a beating — just one late payment can have a severe negative impact. The same goes for high credit utilization on the account.
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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