Here's a new tax prescription for medical expenses
The new tax reform law — the Tax Cuts and Jobs Act (TCJA) — preserves the deduction for medical expenses, unlike many other itemized deductions. But that's only part of the good news for itemizers. The TCJA also temporarily rolls back the threshold for deducting medical expenses to 7.5 percent of adjusted gross income, from 10 percent.
This change applies to the 2017 and 2018 tax years. In other words, it's retroactive, so you still may benefit on your 2017 return.
How to determine your medical deduction for the year
Add up all your unreimbursed expenses that qualify as medical care. This can range from payments for doctor and dentist visits to prescription drugs and equipment like wheelchairs. If the total exceeds the tax law threshold, you deduct only the excess. Otherwise, you get no deduction.
Now that the new tax law lowered it to 7.5 percent of adjusted gross income, it's easier to qualify for a deduction. Here's what you can do:
- For 2017: Go back over your records to see if any deductible expenses have fallen through the cracks. Those extra expenses may be enough to push you over the 7.5 percent mark or increase an existing deduction.
- For 2018: Because of the lower limit, this may be the last year you qualify for a medical deduction. Try to schedule routine expenses such as medical exams and dental cleanings before the end of the year. Or you may decide to undergo that surgery you've been putting off.
This may represent your last opportunity to claim a medical deduction, especially if you don't expect to itemize deductions in coming years. If you have tax questions about medical deductions or anything else, give us a call today.
© MC 2018