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Anne, Master Tax Preparer
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Experience:  Enrolled Agent with 25 Years Experience specializing Individual and Small Businesses
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Are bankruptcy payments deductible And, are payments for Medicaid

Resolved Question:

Are bankruptcy payments deductible? And, are payments for Medicaid "co-pay" deductible? (The state of Indiana pays 80% and we pay $674 monthly).
Submitted: 6 years ago.
Category: Tax
Expert:  Anne replied 6 years ago.
HiCustomerbr />
Thank you for using justanswer. If the bankruptcy payments include items that would have been deductible regardless of the bankruptcy, then those items still retain their character and will still be tax deductible. Examples of this would be home mortgage interest, real estate taxes, back state taxes, medical expenses, etc.

If you were wondering about the legal fees that you may have had to pay to file the bankruptcy itself, that answer is no. Legal fees are only deductible if they are associated with generating taxable income. Please see below:

Other Expenses

Any payment you make out of pocket for medical insurance, doctor visits, etc is tax deductible. The catch here is that your medical expenses must be greater than 7.5% of your Adjusted Gross Income. Judging from the information you supplied above, you may be able to deduct your co pays, but you will still need to exceed the standard deduction for your filing status ($11,400 for married filing joint, $5700 for filing single) before you will get any tax benefit .You would use 2009 Form 1040 (Schedule A)Itemized Deductions to see if claiming your medical expenses, along with any home mortgage interest, property taxes, charitable donations, etc would be more benenficial to you than claiming the standard deduction for your filing status. Please see below:

2009 Inflation Adjustments Widen Tax Brackets and Expand Tax Benefits

I hope this helps.

Edited by Anne on 12/29/2009 at 4:32 PM EST
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