are amounts paid to collection agencies are tax deductiable?

Question

I've missed payments to hospital, they turned over my account to collection agency. if i pay the missed amounts to collection agency, are they tax deductiable?

Answer 1

Pusherhombre is wrong on several points.

Medical expenses are deductible in the year paid. However, only the amount that exceeds 7.5% of Adjusted Gross Income is deductible on Schedule A. Very few people qualify for this deduction.

If you did pay interest, it is going to be personal interest. The only deductions for personal interest are for mortgages and investment interest, subject to certain restrictions. Consequently, any interest would not be deductible.

You would indeed be taxable upon any reduction in debt. However, if the reduction was merely to write off interest and late charges, the debt has not been reduced and nothing is taxable to you.

Answer 2

If depends. The part that was for medical treatment would be deductible if you itemize, in the year that you pay it. Additional charges like interest and fees wouldn't be.

If you itemize, you can only deduct the portion of medical expenses that exceed 7.5% of your AGI (adjusted gross income)that year.

Answer 3

Yes, medical expenses are deductible in the YEAR THEY WERE PAID.

Another thing to consider, however: Forgiveness of debt is taxable AS INCOME. So, if your collection agency made a deal with you to settle in cash for less than what you owe, the difference must be included as income and taxed.

Answer 4

If the debt is for medical service then it is deductable.