Question on IVF medical bills

[mountaintown]

My wife and I did IVF in 2019. Babies were born in 2020. As of 2019, we paid about half and in 2020 we paid the rest on a payment plan.

Unfortunately I didn't think much about tax deductions otherwise I would have concentrated the payments.

My question is...since the medical event occurred in 2019, am I still allowed to deduct medical payments made on the payment plan in 2020? I can't seem to find details on this specific aspect. So example:

2019: IVF treatment. $12,000 cost. 6000 paid
2020: No IVF treatment as babies born $6000 paid this year through payment plan.

Before anyone asks the rest of medical expenses for birth, labor, appointments were covered by health insurance and/or my flexible spending account.

[gocurrycracker]

Think of this as you took out a loan in 2019 to pay for IVF... but you paid 100% of the medical expenses in 2019. You then paid off the loan in 2020.

In your case, it looks like you could have a $12k deduction in 2019 and a $0 deduction in 2020. You could file an amended return for 2019 if that helped...

This is wonky, because let's say everything happened in 2019 and you were billed on Dec 31st but still hadn't paid anything. Then you get no deduction in 2019 and full deduction in 2020 when you actually paid.

The sticking point for most people is you have to itemize to get a deduction for medical expenses, and furthermore those medical expenses must exceed 7.5%-10% of your Adjusted Gross Income to do so.

So let's say your AGI in 2019 was $50k. You could then deduct the amount over 7.5% of AGI (~$3.750) for a total deduction of ~$8,250.

But with a standard deduction of ~$24k, you would need another $16k in itemized deductions before you would see any benefit at all...

[mountaintown]

Hey Jeremy...I should have clarified that this is for state only. You are correct in assuming that I would see little/no benefit on the Fed side.

Are you thinking the deductibility is based on when the charge/bill occurred? I found this guidance from HRBlock but no source really:

https://www.hrblock.com/tax-center/filing/adjustments-and-deductions/deduct-medical-expenses-paid-with-loan/

I definitely would see some benefit on the state side. I've run the numbers...basically we would be doing MFS for spouse and I...and in that event even $4000 with our other itemized expenses makes a dent.

[mountaintown]

I think I answered my own question

Publication 502 states below:

What Expenses Can You Include This Year?
You can include only the medical and dental expenses you paid this year, but generally not payments for medical or dental care you will receive in a future year. (But see Decedent under Whose Medical Expenses Can You Include, later, for an exception.) This is not the rule for determining whether an expense can be reimbursed by a flexible spending arrangement (FSA). If you pay medical expenses by check, the day you mail or deliver the check is generally the date of payment. If you use a "pay-by-phone" or "online" account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged

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The document doesn't reference when the expense incurred or treatment took place. It does specify the date of the payment is the only year in which it could be deducted. However I find the last sentence on credit card payments contradictory here. It seems to indicate the opposite...the date of charge is the year of deductibility. The previous sentence indicates it is the date of the payment when it comes to paying online or making payments. We weren't in a formal loan agreement...the business just let us pay monthly over 12 months.

I'm leaning towards deducting on the state side but I do feel it's ambiguous. If I were to amend it I don't know that I would feel comfortable deducting the WHOLE bill that year either because I didn't pay it all that year.

Thoughts?

Also...a PS my state rules basically refer to the IRS for guidance on that. So it's just following IRS rules and the difference is a lower exemption amount which makes itemizing more possible

[gocurrycracker]

I should have clarified that this is for state only. You are correct in assuming that I would see little/no benefit on the Fed side.

Yeah, every state is different - I have no idea about this

Are you thinking the deductibility is based on when the charge/bill occurred?

No, it is based on when you paid - when the money leaves your account and goes to the care provider.

If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged

You pay Dec 31, 2019 with a credit card. You deduct the full amount in 2019.

You repay the credit card on Jan 1, 2020. You get zero deduction in 2020.

Same for a loan. A payment plan is a loan.