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My daughter is disabled and unable to work, so her income is zero. (She isn't officially declared disabled, which we're trying to fix, but I don't want to talk about that piece here.)

I've paid significant medical expenses for her, which in the past I've deducted on my tax return, but she can probably get better health insurance for less (Mass Health) if she files her own taxes, and I don't claim her.

If she declares those medical expenses on her taxes, but has zero income, what happens? Does she get a "refund"?

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    I think medical expenses are only deductible if they are greater than a percentage of your income, so that won't work. – mkennedy May 1 at 17:51
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    Why can't you do both? She files her own tax return with zero income. Uses that to buy health insurance. You pay her medical expenses and deduct them because she is your dependent. Provided she is between 18 and 26 this should be doable. I would see a tax accountant. – Pete B. May 1 at 19:31
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    There's no such thing as free money. Why would the IRS pay you for anything? That's the opposite of the IRS's purpose... – only_pro May 1 at 20:27
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    @only_pro "There's no such thing as free money" You don't know about the Earned Income Credit then. But you are partially right, the IRS doesn't personally pay people claiming the EIC, what they effectively do is take money from people who do pay taxes and give it to ones that don't. – Glen Yates May 1 at 20:39
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    @only_pro - the IRS is just there to enforce the rules, written by congress. And part of that code contains a number of tax credits, some of which are “refundable”. In the tax code this literally means the IRS writes you a check even if your tax bill was zero. The money still isn’t ‘free’, it just comes from someone else’s wallet. – JTP - Apologise to Monica May 1 at 23:44
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If she declares those medical expenses on her taxes, but has zero income, what happens? Does she get a "refund"?

From a federal income tax perspective, deductions act to reduce taxable income. With medical expense deductions it's only the portion over 10% of AGI that is deductible (I guess in theory all of the expenses are over 10% of AGI in this case). In the case of no income there is no taxable income to reduce, so no benefit to be had.

  • So if you paid nothing in, you'll never get anything "back"? I thought I remembered hearing that the IRS did actually pay you under some circumstances. Not so? – enigment May 1 at 18:33
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    @enigment That is for credits, not deductions (and only some credits) – Vality May 1 at 18:36
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    @enigment There are refundable tax credits that can result in a refund in excess of withheld income tax (earned income tax credit, for example), but medical expenses can at best reduce income tax liability to zero. – Hart CO May 1 at 18:36
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With certain types of tax credits (namely, refundable tax credits), the IRS can wind up paying you, i.e. your tax refund exceeds the income tax withheld from your wages. An example of such a refundable tax credit is the earned income tax credit (EITC).

That said, declaring medical expenses doesn't give you a refundable tax credit, but a deduction that reduces the amount of income that is subject to tax. This will increase your tax refund if you had income tax withheld (or reduce the amount owed if you owe taxes), but it won't cause your refund to exceed the amount that was withheld. For someone with zero income, such a deduction would have no effect.

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She did not pay any of the medical expenses, so she cannot even claim those expenses in her own taxes. If you tried to work this from that angle, making the medical expenses her responsibility and you just giving her the money to pay them, she may actually be on the hook for being gifted too much money, depending on how high those medical expenses are. If a person receives over a certain amount of money as a gift, there is a VERY steep tax on the total amount. On top of that, you cannot claim the medical expenses on your own taxes and, as many have already said, since this is a tax deduction and not a tax credit, this would be a net loss in favor of the IRS. Possibly an extremely large net loss.

Claim the expenses on your own taxes, take the deduction, and maybe get up with a tax professional to work the details of it out. You can worm a fair amount of extra things into the umbrella of medical expenses. Travel to and from the doctors, medication and supplies, even food and lodging purchased during the medical stays. You will need someone more familiar with tax law than I am to work all those details, though.

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