Except for the permanent corporate tax cut, most provisions in the 2017 tax cut legislation expire after 2025 with one notable exception: the medical expense deduction.
Beginning in 2019, the deduction for qualified medical expenses is limited to expenses that exceed 10% of a taxpayer’s adjusted gross income, up from 7.5% for the 2017 and 2018 tax years.
The provision “is likely to affect older taxpayers because they tend to have high medical expenses,” said Mary Johnson, a Social Security policy analyst for The Senior Citizens League, in a statement. “A less generous health cost deduction could mean higher taxable income next year.”
With that in mind, Johnson suggests that taxpayers who have been postponing medical or dental services or filling new eyeglass prescriptions or expensive drug prescriptions consider taking care of those services and prescriptions before this year ends to maximize medical expenses and potentially qualify for the current 7.5% deduction threshold.
The 10% threshold that becomes effective for the 2019 tax year was scheduled to take effect in 2017 — an increase from 7.5% in 2016 and previous years for taxpayers 65 and older — but was temporarily delayed by the tax cut legislation.
“Many older taxpayers probably did not even know that they were getting a medical expense tax break for 2017, or this year,” said Johnson.
But many will likely notice the change for the 2019 tax year. Thirty percent of older taxpayers say they itemize deductions for health care costs, according to a recent nationwide survey conducted by The Senior Citizens League.
As for the 2018 tax year, the league suggests that taxpayers over 65 check their medical expenses and other deductible expenses for the year before filing their tax returns, keeping in mind the 7.5% income deduction threshold.
Although the latest tax legislation doubled the standard deduction to $12,000 for individuals and $24,000 for married couples and retained the additional $1,300 deduction for taxpayers over 65 ($2,600 for married couples), some seniors might still be better off itemizing.
— Related on ThinkAdvisor:
- Year-End Tax Checkup: Maximizing Post-Reform Medical Deductions
- 5 Big Losers of Tax Reform: Year-End Tax Reminder