** This article has been revised from its original version which was published on June…
It is no secret that many senior citizens and individuals with disabilities are faced with significant medical costs each year, including the cost of long term care.
These costs are often financially crippling for many seniors and individuals with special needs and their families. To offset the high medical expenses, many taxpayers take advantage of the Medical Expense Deduction on their federal individual income tax returns.
The Medical Expense Deduction allows people with high medical costs to reduce their taxable income by subtracting some out-of-pocket medical expenses, including qualified long-term care expenses. The deduction is subject to what’s known as a “floor”, which is a percentage of the adjusted gross income that must be subtracted from the itemized amount to determine the deduction.
For example, under current law a taxpayer whose adjusted gross income was $50,000 in 2017 can only deduct the unreimbursed medical expenses paid in 2017 that exceeds $3,750, which is 7.5% of the $50,000 adjusted gross income.
During the process of enacting the new federal tax law, known commonly as the Tax Cuts and Jobs Act of 2017, Congress considered removing the Medical Expense Deduction entirely but was ultimately persuaded from doing so thanks in large part to the advocacy of Elder Law attorneys at the National Academy of Elder Law Attorneys (NAELA).
Under the prior law, if a taxpayer or a taxpayer’s spouse was 65 old years in years 2013-2016 then medical expense deduction floor was 7.5% of their adjusted gross income. For all other taxpayers, the medical expense deduction floor was 10% of their adjusted gross income.
Now, under the Tax Cuts and Jobs Act of 2017, taxpayers whose unreimbursed medical expenses exceed 7.5% of their adjusted gross income can claim a deduction for those expenses in 2017 and 2018.
After 2018, the medical expense deduction floor will revert to 10% of adjusted gross income for all taxpayers, regardless of age.
The continuation of the Medical Expense Deduction and temporary reduction of the Medical Expense Deduction floor is a major win for the millions of senior citizens and individuals with special needs who rely on this deduction to offset some of the high cost of long-term care.
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