Medical expenses covered by insurance shall not be included in the deduction of medical and childbirth expenses

The Taipei National Taxation Bureau of the Ministry of Finance stated that when reporting the medical and childbirth expense deductions for the taxpayer, spouse or dependent relatives in the comprehensive income tax settlement return, the expenses are limited to those paid to public hospitals, National Health Insurance contracted medical institutions and institutes, or hospitals whose accounting records are complete and correct as determined by the Ministry of Finance. However, the portion received from insurance benefits cannot be deducted.

The bureau explained that the legislative intent of the "medical expenses" itemized deduction as stipulated in Article 17, Paragraph 1, Item 2, Item 3 of the Income Tax Act is that the medical expenses paid for the treatment of physical illnesses are expenses that have policy implications in life and affect the ability to pay taxes, and can be deducted when calculating net income. However, if the taxpayer has purchased health insurance and has made up for the relevant medical expenses with insurance payments, there is no need to make further deductions. The proviso to the same item 3 clearly states that the portion of medical expenses that has been paid by insurance shall not be reported for deduction.

The bureau pointed out that the taxpayer Mr. A's 2013 comprehensive income tax settlement declaration included medical expense receipts from Hospital A, which listed a deduction of more than 200,000 yuan for medical and childbirth expenses. The bureau denied the deduction because more than 50,000 yuan of the deduction was received through insurance. Mr. A claims that the above insurance payment is actually a refund of the premiums he paid annually for his medical insurance, and requests that he be allowed to recognize the medical expense deduction. After review, the Bureau decided to reject the review on the grounds that the purpose of medical insurance benefits is to share the medical expenses of the insured and reduce their medical burden, and that life insurance benefits are exempt from income tax, and the portion of medical expenses that are covered by insurance benefits cannot be deducted.

The bureau urges taxpayers to pay attention to the medical expenses that must be paid to qualified medical institutions when filing comprehensive income tax settlement declarations and reporting medical and childbirth expense deductions. In addition, they should also note that the portion of medical expenses paid by insurance should not be reported as a deduction to avoid additional taxation. If taxpayers have any questions or are not familiar with tax laws and regulations, they can call the local National Tax Bureau's free service hotline 0800-000-321 or contact the tax collection agency under their jurisdiction to protect their own rights and interests.

(Contact person: Mr. Qian, Legal Affairs Section; Tel: 2311-3711 ext. 2031)