In every election cycle, it seems like American taxpayers ask lawmakers for tax reform. Let’s face it, none of us want to pay more tax than we absolutely must. In fact, many of us try to take every deduction available to us when filing our annual tax returns. Taxpayers with chronic, expensive health conditions may be dismayed then, to hear that the new tax reform bill targets something they’ve taken advantage of in the past – the annual medical expense deduction.
Current Tax Reform Bill
Lawmakers in D.C. have submitted a tax reform bill that may offer relief regarding issues that may cause taxpayers to heave a sigh of relief. However, removing traditional deductions that benefit many middle-class and elderly citizens is guaranteed to ruffle some feathers.
Your Medical Expense Deduction
Under current laws and IRS guidelines, taxpayers may deduct part of the medical expenses from their annual tax bill. Of course, restrictions like the following apply:
- Eligible medical expenses must total more than 10% of adjusted gross income.
- Some medical costs are deductible, others are not.
- Taxpayers’ reimbursed medical expenses are not deductible.
- To claim this deduction, taxpayers must itemize deductions and fill out the appropriate forms.
In 2015, about 8.8 million taxpayers over the age of 65 used the medical expense deduction. According to IRS data, most people who benefit from this deduction have an annual income of $200,000 or less, but people with high incomes and high medical expenses can still benefit from the deduction.
There’s no guarantee that the proposed tax reform bill will pass the Senate or be signed into law by President Trump. If it passes in its current form, though, removing a deduction used by many American taxpayers may cause an immediate adverse effect.
If you or someone you love suffer from chronic or debilitating conditions, the loss of the medical expense deduction may affect your quality of life. Even your estate planning may be affected, particularly if you have planned for future incapacity or disability.
To discuss your concerns with an experienced Arizona lawyer, call us at (480) 418-8448 or check out one of our free seminars. We provide estate planning advice for clients throughout Arizona, including Ahwatukee, Chandler, Gilbert, Sun Lakes, Mesa, and Tempe.