Wash. D.C. msn.com
With the tax deduction in question, millions of taxpayers who deduct medical expenses each year are right to be concerned. Congress is attempting to make massive changes to both America’s health care system and tax code. With those changes in mind, worried readers of Tax Report have written to ask what the impact will be on the one issue that is common to both: the medical expense deduction.
The simple answer is there is a range of possible otcomes due to conflicts in the proposals. And users of this tax deduction can’t do much in the meantime other than write to Congress and avoid stratetic mistakes. The uncertainty shifted into high gear on April 26th, when President Donald Trump released tax proposals strongly suggesting the health care deduction should be eliminated. The one page handout from the White House called for protecting only the write offs for home ownership and charitable gifts, and for cutting “targeted tax breaks that mainly beneift the wealthiest taxpayers”.
While this language seems to aim squarely at the tax deduction for state and local taxes, it also describes the one for medical costs. In both, the tax benefit is proportional to the filer’s rate–and that typically rises with income. Yet two days later, the House of Representatives passed a health care bill with a little noticed provision that goes int he opposite direction. Instead of cutting the medical tax deduction,the House expanded it by lowering the income threshold from 10% to 5.8%, beginning in 2017. Under this rule, more people would be able to claim the write off, and those who already do could deduct more.
Experts say the House’s expansion of the break may just be a temporary budget tactic. The more generous write off could be replaced by the Senate with another provision such as a larger tax break for older Americans who purchase individual health insurance. The medical tax deduction could also survive intact for 2017, especially if Congress doesn’t finish major tax changes this year.