Just because someone else helps you with paying an expense doesn’t necessarily mean you can’t legally itemize that expense on your 1040 come tax time.
Over that SmartMoney, Tax Guy Bill Bischoff writes about three examples of expenses you can deduct, even if someone else paid them for you.
1. Medical Expenses
Most of you know that you can deduct medical expenses to the extent they exceed 7.5% of your adjusted gross income, but it’s not as well known that a 2010 Tax Court decision ruled that a woman was able to deduct around $25,000 of medical expenses that had actually been paid by her mother, effectively labeling the money as a gift from the mother to the daughter.
“Thanks to the tax-law exemption for gifts that are made in the form of direct payments to medical-service providers, the mother’s payment of the medical expenses had no federal gift tax consequences for her,” write Bischoff.
2. Real Estate Taxes
In the same Tax Court case, it was decided that the could claim an itemized deduction for more than $5,500 of local real estate taxes that were actually paid by her mother. “Thanks to the annual federal gift tax exclusion (currently $13,000), the mother’s payment of the real estate taxes had no federal gift tax consequences because it was less than the $12,000 gift tax exclusion that applied for the year in question (2006),” Bischoff explains.
3. Seller-Paid Points for Home Mortgage
In addition to any mortgage points you purchase when buying your principle residence, you can also deduct mortgage points paid by the seller on your behalf. “In fact, IRS Revenue Procedure 94-27 actually requires you to claim the deduction,” says Bischoff. “Don’t ask questions. Just follow directions and claim that deduction, even though the seller paid for it.”
Free Lunch: Deducting Expenses You Never Paid [SmartMoney.com]