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Medical team tranfers a patient from an ambulance to a waiting air ambulance.Click on an image to go … [+]
Yesterday, a client called in a panic. Her daughter was on an overseas trip, and while touring a rainforest preserve, her daughter slipped, fell 30 feet and struck her head. Her daughter was in a coma. My client was desperate to bring her home and into the care of the best neurologists as quickly as possible. There was an air ambulance service, but her daughter’s health insurance would only cover half of the costs of the service; and, the service would only take cash, which my client did not have readily available. On sharing this news, two disparate forces emerged to bring her daughter home: a generous family friend and section 2503(e) of the Internal Revenue Code.
In this case, my client had a good friend who had the cash available. After a flurry of paperwork back and forth, the funds were wired directly to the air ambulance service. As I write this, the daughter, still in a coma, is in the air and on her way back to the U.S. In these scenarios, time is of the essence, the prompt funding of the air ambulance service and the willingness of a family friend made all the difference.
Section 2503(e) of the Internal Revenue Code states that the gift tax does not apply to amounts paid by an individual, on behalf of another individual, if paid directly to a provider of medical care (or provider of medical insurance) as payment for that medical care or insurance. This exemption to the gift tax is in addition to the annual gift tax exclusion ($16,000 per person in 2022) and the amount is not capped, in contrast to the medical deductions you take on your income tax returns. This exemption applies regardless of the relationship of the donor to the donee.
So, if you know of someone who has a medical or financial crisis, keep in mind that you can cover their medical expenses or their health insurance premium, by paying those costs directly to the medical service provider or insurance company; and, you will not incur a gift tax for doing so. Who says the IRS has no heart? In this case, not me.