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Dear Tax Talk,
Is charity care from a hospital considered income in taxes? If you went to a hospital and got the bill paid by the hospital through charity care, is that considered a forgiven debt?
Many hospitals receive government funds that are collected from the community through various tax programs, and these hospitals are required by federal and state governments to provide uninsured and low-income patients with free or reduced-cost health care. This is also known as “charity care.” The hospitals have guidelines and requirements to determine who is qualified to receive this type of medical care.
Generally, charity care is defined as provided health care for which patients are not billed, and there is no expectation of payment or reimbursement on the part of the patient. Because there is no liability for payment, this type of benefit received is not considered a forgiven debt. In addition, because the health care services are paid through governmental tax programs, the value of this health care is not considered income and does not need to be reported on Form 1040.
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