Your payment of someone else's medical expenses is a qualified transfer (a nongift gift). The IRS allows you to make this type of gift without incurring the federal gift tax or the federal generation-skipping transfer tax (GSTT).
The payment must be for qualified medical care and made directly to the medical care provider. This exclusion allows you to pay an unlimited amount and doesn’t count toward your $19,000 gift tax exclusion.
Let’s take a closer look at how these life-enhancing gifts qualify as gift-tax-free gifts.
Only applicable to tax-deductible qualified medical expenses
The exclusion applies only to medical expenses that are deductible for income tax purposes.
In general, the medical expenses must be for diagnosing, curing, treating, or preventing disease, or for treatments that affect any structure or function of the body.
You can also include payments you make for treatments that lessen the effects of disease (for example, prescription painkillers) or for any medical insurance premiums for others that you pay.
Payments must be made directly to the medical care provider
The payment can be made on behalf of anyone (that is, it need not be a relative), but you must make the payment directly to the medical care provider.
If you give money to someone to pay for medical expenses on their own, that gift will be applied to your lifetime gift tax exclusion if it’s over $19,000. You will also need to file IRS Form 709 for the tax year in which the gift is made.
The special gifts may reduce your estate tax liability
Making a gift of medical care can reduce your federal or state estate tax liability by removing the value of the payment from your gross taxable estate.
Considerations
Not all medical care gifts are gift-tax exempts.
Amounts reimbursed by insurance
Any amount for which the patient is reimbursed by insurance does not qualify for the exclusion.
Here’s an example. You gave your niece a total of $25,000 in 2026, including a separate $9,000 payment to the hospital to pay for the delivery of her daughter. Her insurance reimburses her $4,000, which does not qualify as a gift-tax-exempt gift. That would reduce the gift-tax-exempt value of your medical gift to $5,000, which would raise your non-medical gift amount to $21,000. Since that amount is over the $19,000 annual limit, the whole amount would apply to your lifetime gift-tax exemption and you would have to report this gift on your 2026 tax return.
Invalid medical expenses
The exclusion applies only to medical expenses that are deductible for income tax purposes. The IRS will not allow you to make a tax-free medical care gift for other types of expenses. The most common examples include:
- Cosmetic surgery
- General health maintenance (e.g., annual checkups)
- Treatments or operations that are illegal
- Nonprescription medications and toiletries
How to do it
To qualify, you must make the payment directly to the medical care provider. Make sure you get a receipt in case the IRS ever audits you. If you have any questions, contact your accountant or tax professional.
Prepared by Broadridge Advisor Solutions. © 2026 Broadridge Financial Services, Inc.