A few days ago, I saw a viral Twitter thread in which the author asked about RIP Medical Debt:
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Who is RIP Medical Debt?
RIP Medical Debt is a 501(c)(3) charitable organization that works to eliminate personal medical debt. It was formed by former debt collection execs and they purchase medical debt on the collection market and forgives it.
The legal name of the organization isn’t RIP Medical Debt, that’s just a convenient website, but it’s a more mundane “Medical Debt Resolution Inc.”
It’s a legitimate charity based out of Long Island City, NY and gets the maximum 100 out of 100 from Charity Navigator. They are also well regarded by GuideStar.
As of March 2022, they’ve claimed to have forgiven over $5.6 billion.
Their mission? “Acquire and abolish, I.E. forgive, medical debt owed by individuals experiencing poverty or other hardship (please see schedule o for a more complete description of the organization’s mission)”
If you want to look it up yourself, their EIN is 47-1442997 and the IRS has all their documents.
Rise to Popularity: The John Oliver Show
Do you remember when the John Oliver Show bought a bunch of medical debt and simply forgave it? The segment aired June 2016 and was extremely popular. They bought nearly $15 million of medical debt for $60,000 and just forgave it (by donating it to RIP Medical Debt).
You can watch the clip here:
And recently, MacKenzie Scott, who famously donated $2.7 billion to 286 nonprofit organizations in 2021, donated $50 million to the group in December 2020.
It’s OK to Be Skeptical
For many people, the first time they interact with RIP Medical Debt is much like the anonymous Twitter user in the introduction – they get a letter from RIP Medical Debt.
And the only people who will get a letter from RIP Medical Debt are folks who have medical debt in collections. So it’s understandable that a group of people, who have likely been hounded by calls from collection companies, would be suspicious of a letter that claims to have forgiven their medical debt.
It sounds too good to be true.
But this is one of the few things where it is true.
That said, there may be scammers pretending to be RIP Medical Debt! RIP Medical Debt will never ask you to do anything – they won’t ask you to pay them, give them information, etc. They don’t take individual relief requests.
If anyone says they can help you get rid of medical debt if you pay them – RUN. They are not the same organization and if they say they are, they are probably trying to scam you. RIP Medical Debt doesn’t operate that way – they simply buy debt from collection agencies on the open market and forgive them.
Do you owe taxes on the forgiveness?
The letter will give you more information but the summary is that the specified debt has been forgiven with no adverse tax consequences to you. RIP Medical Debt relieves debt as an act of “detached and disinterested generosity” and so it is not taxable.
As it turns out, the definition of a gift isn’t codified in tax code but is “defined” by a ruling. According to a Supreme Court ruling in Commissioner v. Duberstein, “a gift “proceeds from a detached and disinterested generosity’ and is made ‘out of affection, respect, admiration, charity or like impulses,’ but doesn’t include a transfer that is made ‘from the constraining force of any moral or legal duty, or from the incentive of anticipated benefit of an economic nature.'” (source)
In short, the relief is a gift and the gift is not taxable. Also, RIP Medical Debt says they don’t file a Form 1099-C, Cancellation of Debt, with the IRS.
Donate to IRS Medical Debt
You can contribute to RIP Medical Debt and get a tax deduction because they are a 501(c)(3) charitable organization, you can do so on this page.