Pay medical bills now?

Assuming your taxable income in 2009 is not going to go up significantly and kick you into a higher tax bracket, you should pay only the amount needed to wipe out your 2008 tax liability. A quick calculation on my computer provides an example for someone who is single, under age 65 and has paid $600 in state income tax and made $400 of substantiated charitable contributions. The standard deduction (5450) and personal exemption (3500) equals $8950. That makes your taxable income $15050. To wipe out that income you would first have to pay $6250 of medical bills to arrive at itemized deductions equivalent to the standard deduction ($1800 of the medical would be disallowed under the 7,5% AGI rule). You would then pay another $15050 to wipe out your taxable income. That's a total payment of $21300 in

The above assumes your taxable gross income was $24000.

Is there interest charged on the medical expenses if they are not paid by a certain date? Can you pay off the medical expenses in installments such that you do not have to borrow? If you have to borrow, what is the interest rate on what you borrow?

As Alan pointed out, sure you can save around $1900 (with Alan's assumptions re filing status etc.) in taxes. But if you have to borrow $20,000 or so to do so and at an interest rate of 10%, then it may be more financially advantageous to pay in installments. More information is needed.

Thanks a lot for your very detailed answer. You also explained all the factors I needed to knwow about.

These are not tax questions. It's up to the hospital to determine how much interest to charge. However, there may be a law that there hospitals cannot charge interest for 6 months (or maybe forever), as I've never seen it on my bills. The interest that the hospitals charge should be deductible -- if they charge $150 interest, you end up paying saying 50150, and that 50150 is deductible subject to the usual limits.

You can call the hospital and tell them you'll pay X dollars now, Y dollars early next year, Z dollars the following year. I'm not sure if they will be OK with the Z dollars as it is very far into the future, and they may send your account to collections. But if you negotiate, they very well might accept your offer. They will almost certainly accept the X and Y dollar payments. Also, try to negotiate the price, as the insurance companies do this -- so find out from a friend what insurance companies actually pay for that procedure. Though these are not tax matters.

A small correction: if the provider charges interest on late payments, the interest is not a deductible medical expense. It's nondeductible personal interest. The same is true if the OP borrows money to pay the medical bills; the interest expense is not deductible.

Interest and late payment penalties are not included in the definition of "medical care" expenses in IRC Sec. 213(d).

Katie in San Diego

" snipped-for-privacy@yahoo.com"

Answering these questions is essential to assisting the OP in trying to decide whether to take a tax deduction this year, next, or never, for the full amount of the medical expenses or part of them each year.

But I'm still happy to have honda raise them for me.

Your words make it seem like you objected to honda answering non-tax questions.

But maybe not, since you do too. I appreciate your answers as well.

LOL. Thank you. Actually, the doctor who did my required colonoscopy told me to do this too -- He told me that he rarely got from an insurance oompany what he billed, and there was no reason I should pay more than the insurance company would pay -- and I actually tried some of this yesterday and today. I have a lot of bills, the radiology, anesthesiolgy, surgery, rehab, etc. and the biggest, the hospital. One of the medium sized bills had an quick payment amount that was 30% less than the full amount. That was good, especially psychologically, and it was the price the woman on the phone quoted me. Another one lowered the price 30% just because I asked. I didn't have to beg or anything.

The othere were different departments of the hospital, and share a policy, and said they would send me a form to fill out.

So while I did spend several thousand dollars in tne last two days, even if I'm wrong about what t I made this past year, even if it is less, what I spent was probably not enough to get past the threshhold that Alan explained to me. OTOH< my spending this year depleted the amount I will spend next year, so I may not even get the maximum dedution that I could have even next year. Oh, well, I tried, so be it. This will just come out of the money I might have left the government when I died, asssuming I still had some money then. (One of the candidates last year said that paying more taxes was patriotic, and a Republican or two made fun of him. I think it is indeed patriotic, just as giving the government money is.)

But really while I'm not unhappy about this is that I finally opened all my bills on Monday, and it's only about half of what I thought it would be. I called the billing office on my third day in the hospital to learn my charges so far, and I thought they gave me a number twice what the actual hospital bill is, and I though that by the time I was discharged it would be 50% more even than that. The amount stunned me and I asked again, and thought I heard the same number. So I'm glad the bill even before any negotiation is about 40% lower than I thought it was.

Thank you all.