Medical Expense Deductions Preserved In Tax Bill

The new GOP tax bill passed in December 2017 was the first major tax reform in over thirty years and has a number of important updates for Americans. Of those Americans burdened with enormous amounts of medical debt, the new tax bill appears to be a winner. The deduction for medical expenses, while a heated topic of debate, was actually expanded for two years. During that period, filers will be able to deduct medical expenses that add up to more than 7.5% of their adjusted gross income. Previously, the threshold for most Americans was 10% of adjusted gross income.

Your 2017 Medical Expenses

While nearly all the tax bill’s changes don’t take effect until 2018, the medical expense deductions will apply to 2017 medical expenses. The change will last until 2019 and will return to 10% after that unless another bill is passed.

Low Income, High Medical Expenses

For individuals who are 65 or older, the threshold was already at 7.5%, but the new law states that the threshold will be the same for everyone, which should help those with low incomes and high medical expenses. As an example, if you have an adjusted gross income of $50,000, you will be able to deduct medical expenses that exceed $3,750. While individuals who have health insurance premiums for employer-sponsored coverage plans that they pay for with pretax dollars won’t qualify, this law applies to medical expenses outside of health care premiums. In 2015, over 8 million taxpayers took the medical expense deduction. The healthcare medical expense deduction is also intended to drive down the health care debt incurred by senior citizens.

Medical debt is one of the leading causes of bankruptcy in the U.S. and so by providing this provision in the new GOP tax bill, it will hopefully be able to drive down the overall debt burden for individuals who are elderly or have an illness that requires a large amount of out-of-pocket payments. If you continue to struggle with medical debt, filing for bankruptcy protection may be a solid option, as medical debt can be discharged in bankruptcy.  Contact your my Modesto bankruptcy office to discuss your financial situation and find out if bankruptcy protection is right for you.