Legal Question in Tax Law in North Dakota
Trust Income
A check was paid directly to me from my childrens trust fund. The money was used to pay a large medical bill for one of my children. I would like to find a way to deduct this on my taxes if possible. My questions are: 1) Do I have to report this as income on my tax return because the checks was made to me? 2) Can I some how deduct this amount as medical expenses on my year end taxes?
Thank you, please e-mail me if you need additional information.
1 Answer from Attorneys
Re: Trust Income
Sorry! I have bad news and then worse news! But the good
news is that I could be wrong.
If these are minor children, under federal law you
generally must declare the payment to you used for
your child's necessities (medical bills) is considered
income; attorney's call it phantom income because you
don't really get the money! By the way, it's the same
even if the trust check were written directly to the
medical care provider; it's still 'income' to you because
it satisfies an obligation you have as a parent under
state law. (I'm assuming your state is like mine, but
it's possibly NOT!!! So you ought to get advice from
an attorney licensed to practice in YOUR state!)
On the other end, medical care expenses are generally
legitimate deductions, but I believe they are subject to
a 7% of AGI (adjusted gross income) "floor"; if various
specific deductions don't amount to that much, you can't
deduct them! But for that, you should check with your
accountant.
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