Can Medical Expenses Paid Through GoFundMe Donations Still Be Tax Deductible?

This is a really good question with a somewhat complicated answer. When someone receives money through GoFundMe for medical expenses, those donations are generally considered gifts to the recipient and aren't taxable income. However, for medical expense deductions, you can only deduct expenses that you personally paid for. IRS Publication 502 addresses this by stating you can only deduct medical expenses that you paid using your own funds. Since the medical expenses were paid using donated funds (essentially someone else's money), your sister cannot claim those specific expenses as deductions on her taxes. Think of it this way: the tax benefit comes on the front end (not having to report the GoFundMe money as income) rather than on the back end (through a medical expense deduction). If she were allowed to deduct expenses paid with donated money, she'd essentially be getting a double tax benefit.

I went through something really similar last year with my dad's cancer treatment. I was completely overwhelmed trying to figure out the tax implications of everything until I found taxr.ai (https://taxr.ai). It totally saved me! You upload your tax documents and medical receipts, and it does a full analysis of what's deductible in your specific situation. For me, we had a mix of GoFundMe donations, personal payments, and insurance reimbursements, which made figuring out what was actually deductible a nightmare. Their system showed me exactly which medical expenses qualified based on the source of payment, and even helped me document everything correctly in case of an audit. Definitely worth checking out for complicated medical expense situations like this.

Just wanted to follow up - I actually tried taxr.ai after my last comment and wow, it was really helpful for my situation! I had about $28,000 in medical expenses for my mother between GoFundMe and our own money, and I was totally confused about what I could deduct. The system clearly separated which expenses were paid from donated funds vs. our personal accounts, and gave me documentation showing exactly what was deductible. It even caught some transportation expenses to medical treatments that I didn't realize were partially deductible! Just finished my taxes and feel way more confident that I'm not accidentally claiming deductions I shouldn't or missing ones I deserve. Thanks for the recommendation!

If you're still trying to get clarification directly from the IRS on this GoFundMe medical expense question, good luck trying to reach them! I spent WEEKS trying to get someone on the phone for a similar question last month. Always "high call volume" and disconnects. Then I found Claimyr (https://claimyr.com) and it was a total game-changer. They have this system that gets you through to an actual IRS agent without the endless waiting. You can see how it works here: https://youtu.be/_kiP6q8DX5c I got through in about 15 minutes when I'd been trying for days on my own. The IRS agent I spoke with confirmed exactly what others are saying here - you can't deduct medical expenses that were paid with GoFundMe donations. But she also gave me specific advice about how to document everything properly and pointed me to some additional deductions I could take for the portion we paid ourselves.

I have to eat my words. After my skeptical comment, I was still desperate to resolve a similar medical expense question about my wife's cancer treatments that were partially crowdfunded. I tried Claimyr as a last resort before giving up. I got connected to an IRS agent in about 20 minutes (after trying unsuccessfully for 2 weeks on my own). The agent was actually super helpful and walked me through exactly how to handle the documentation for medical expenses that were partially paid through donations. She confirmed I could only deduct what came out of our pocket, but also showed me how to properly document everything to avoid audit issues. Definitely worth it just to get a definitive answer straight from the IRS instead of stressing about whether I was doing it right.

Something nobody's mentioned yet - even though your sister can't deduct expenses paid by the GoFundMe, she should still track ALL medical expenses because medical deductions only apply to amounts that exceed 7.5% of her AGI. So let's say her AGI is $80,000 - she'd need more than $6,000 in qualified medical expenses before any become deductible. If she paid $10,000 out of pocket beyond the GoFundMe, she could deduct $4,000 ($10,000 - $6,000). Also, did she pay any medical expenses before receiving the GoFundMe money? Those might still be deductible if they came from her own funds.

Has anyone used any of the major tax software programs to handle this specific situation? I'm trying to use TurboTax for a similar issue with GoFundMe medical expenses and can't figure out where to even indicate that some expenses were paid through donations.

This is such a tough situation to navigate, and I feel for your sister dealing with this on top of everything else. Just wanted to add one important point that might help - make sure she keeps detailed records separating what was paid from GoFundMe vs. what came out of pocket, even if she can't deduct the GoFundMe portion. The IRS can be pretty strict about documentation if they ever audit medical expenses, so having clear records showing the source of each payment will be crucial. I'd suggest creating a simple spreadsheet with columns for date, expense description, total amount, GoFundMe portion, and out-of-pocket portion. Also, don't forget about smaller medical expenses that might have been paid directly - things like prescription copays, parking fees at the hospital, or travel expenses for treatment. These add up and are often overlooked but can be deductible if paid from personal funds. Hope your niece continues to respond well to treatment. The tax stuff is complicated but manageable with good record-keeping!