What is the tax conswquence if I deduct an expense which is later reimbursed by a third party?

Question

I need a reference to the Internal Revenue Code or Reg.

Answer 1

You may be required to include all or part of your deduction as income in the year of reimbursement. The amount of income will be the amount of the deduction that resulted in a tax benefit to you. It is usually entered on Line 21 Other Income of Form 1040.

This is called "recovery" and is discussed in Publication 525. Several examples are included, see page 20.

http://www.irs.gov/pub/irs-pdf/p525.pdf

Answer 2

That would depend upon who reimbursed you. If you took a medical expense deduction that was later reimbursed by your insurance then it would be income. However if a friend or family member reimbursed you that would be considered a gift to you with no tax consequences.

Answer 3

You would deduct it in the first place only if you don't expect to be reimbursed for it. If it was later reimbursed, you would claim it as income.