Ok, have a question. I was told I can deduct these expenses but I'm not so sure.

In 2013 I had to pay 20k of medical bills that were due to an accident. I paid this out of my own pocket. However, I got money from both my auto and the lady who hit me insurance companies. They paid me directly. I had to pay the Health Insurance company directly because they did not put a claim in on time to get the money before it was given to me. So they were going to sue me for 53k but negioated it down to only 20k. I was given 33k by my insurance (under insured protection) and 33k by hers due to the amount of damage she did to me and my vehicle.

My question is this. can I deduct the 20k on my taxes. I only had to pay this because I have a self funding health plan at work. If we didn't have this I would not have had to pay any of this back.

Thanks in advance.

#1;Basically, as you can see, you cannot deduct anything you were reimbursed for. You can only deduct for premiums and out of pocket expenses that were not reimbursed.

#2; Punitive damages are taxable to the recipient. As for a payment from a company for fraud, this is a penalty and is not deductible unless insurance paid for it. If punitive and you send the recipient of the $ a 1099 for these, then perhaps these would be deducted as another picked up income, but without legal documentation I doubt it.I guest this is a legal issue. You need some professional accurate help from a liab attorney.

OK, so basically the money I got from her and my auto insurance policy will technically be considered reimburstment? That is what I'm gathering. Even though I had to pay for it after I got the payouts and they couldn't put a lien on the money.

I meant your total deductible medical expenses for the year must be reduced/ zero by any reimbursement of deductible medical expenses. It makes no difference if you receive the reimbursement or if it is paid directly to the doctor, hospital, or other medical provider. the expenses that you pay with the settlement are not deductible since the settlement is not included in income. Settlement for personal injury is not taxable. If your medical expenses are more than the settlement fo the injury, then you can deduct the difference as itemized deduction. however, if you carry pre-tax medical expenses that are savings accounts set up by you or your employer to save your money for future medical expenses, then since, the money is deducted from your wages before tax(tax-free), you cannot take a medical expense deduction.

OK, that is what I assumed.

Thank you very much.