A relative had some very significant dental surgery performed in 2007. The doctor's office arranged a loan with a third-party lender for her. She paid much of that loan off in 2007, and the remainder in
2008.Since the lender was not the doctor's office, am I correct in assuming that her loan payments in 2008 are not deductible?
And is it also the case that there's no way to carry forward these medical expenses? The cost was actually around double her income in
2007.snipped-for-privacy@gmail.com (Russ in San Diego) posted:
with the proceeds of the loan.
Loan interest or payments are not deductible (except in the case of home mortgage interest). Also, there is no way to carry forward excess medical expenses.
Bill
Your assessment is essentially correct. BUT what you've missed is that since she used the loan proceeds to pay for dental expenses in 2007 ALL of those expenses were deductible in 2007.
Remember, for a cash basis taxpayer you get to deduct expenses in the year you pay them. She paid dental expenses in 2007, that she used a loan is besides the point. Her dental expenses were deductible in 2007. She may want to revisit her 2007 return, it may be beneficial for her to amend.
Gene E. Utterback, EA, RFC, ABA
If there were any business loss at all, there could be an NOL. Also watch for things like a state income tax refund for 2007 received during 2008 to potentially (and probably0 be non-taxable under the tax-benefit rule.
"Russ in San Diego" wrote
The medical expenses would be deductible when ~paid~, even if they were paid with loan proceeds. So you're looking at a 2007 deduction, if any could be taken. It doesn't matter when she paid the loan.
Medical expenses can not be carried forward or backward.
messagenews: snipped-for-privacy@c18g2000prh.googlegroups.com...
Thanks. Actually, I didn't miss that. She actually DID deduct all those medical expenses in 2007, reducing her taxable income to zero. I prepared her taxes and came to the same conclusion as the consensus here. I was just triple-checking because this relative has asked me about it several times, and I wanted to verify my conclusion before it's too late to file a 1040X, and while there's still time to reflect any change in her 2008 return.
And now I'm confident I got it right. Unfortunately. 8-)
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