Can I Deduct a Medical Garnishment?

If you incur medical expenses and do not pay the hospital or medical provider, your creditor may initiate collections strategies such as contacting you by phone, sending you late notices or hiring a collections agency to contact you. If these strategies do not result in payment of your medical bills, the creditor may obtain a judgment against you by suing you in civil court. In most states, a creditor with a valid judgment can obtain a garnishment to take a portion of your wages to pay your defaulted debt. However, you might be able to claim garnished amounts as deductions to reduce your tax liability.

Allowable Deductions

Whether you can deduct garnished amounts used to pay medical expenses depends on whether the expenses would have been deductible if you had paid them directly to the medical provider. These amounts include garnishments for expenses not paid by your insurance company or other medical coverage. Eligible expenses include hospital and emergency room charges, surgery and anesthesia costs, addiction treatment, diagnostic fees, acupuncture and psychiatric care. Internal Revenue Service Publication 502 provides a complete list of deductible medical expenses.

Disallowed Deductions

If the medical expense would not have been deductible if you had paid the provider directly, you may not deduct a wage garnishment related to the service. Teeth whitening, cosmetic surgery, nonprescription medicines, hair removal and nutritional supplements are not considered deductible medical expenses. Also, you may not deduct judgment costs such as interest, attorney's fees and court costs.

Adjusted Gross Income Threshold

Before you may deduct wage garnishment amounts related to medical expenses, the garnished amounts must meet the adjusted gross income threshold -- you may not deduct medical expenses if they total less than 7.5 percent of your AGI for a single tax year. However, because most states allow judgment creditors to garnish up to 25 percent of your wages after taxes have been deducted, garnished amounts might exceed the 7.5 percent AGI threshold requirement.

Considerations

Although you may deduct medical garnishment amounts in some cases to reduce your tax liability, avoiding a judgment and resulting garnishment will help you avoid severe financial consequences. If you stay in contact with your medical creditors, you might be able to negotiate a monthly payment substantially less than the 25 percent maximum garnishment creditors may order in most states. Also, a money judgment can severely affect your creditworthiness for up to seven years.