Hello Everyone! I just wanted to share some good news with you about a possible change regarding itemizing medical expenses.
So, last week (September 13 to be exact), the U.S. House of Representatives passed a bill titled ‘Halt Tax Increases on the Middle Class and Seniors Act’ (the bill is H.R. 3590 which you can view right here => H.R. 3590), by a vote of 261 to 147, that would lower the Adjusted Gross Income (AGI) threshold for an itemized deduction for unreimbursed medical expenses—from 10% to 7.5%—for all taxpayers, regardless of age under the Affordable Care Act (ACA).
Under the ACA, taxpayers may deduct from their AGI, to reach their taxable income, the cost of unreimbursed medical expenses that exceed a certain percentage of their AGI. Following a law change in 2013, individual taxpayers under the age of 65 could only deduct medical expenses when they totaled at least 10% of their AGI – the value of expenses above this 10% threshold can be deducted.
The Bill passed by the House of Representatives would prevent a change to the threshold for those over 65 years of age, which from the end of this year (2016) would have increased the threshold applying to this category of taxpayers from the current 7.5% to 10%.
The House Ways and Means Committee Chairman Kevin Brady (R – Texas) welcomed the Bill, he said: “Before Obamacare, Americans could find some relief in their ability to deduct high-cost, out-of-pocket medical expenses on their taxes. … This Obamacare provision is a tax hike, plain and simple. It makes paying for care even more difficult for individuals, families, and seniors who may already be struggling to afford the care they need.”
The National Taxpayers Union added that the Bill would “have an enormous impact on the budgets of American families. … Over 10 million taxpayers every year use this deduction to cushion the burden of medical expenses and this tax increase would cause an undue financial burden to seniors and those struggling with chronic medical conditions.”
However, the Center on Budget and Policy Priorities noted that “Congress has already delayed the medical device tax, the health insurance tax, and the excise tax on high-cost health plans (the so-called Cadillac tax). Repealing the increase in the medical expense deduction threshold would encourage efforts to scale back still other revenue provisions of health reform.”
Ways and Means Committee Ranking Member Sander Levin (D – Michigan) also criticized the unfunded nature of the legislation, and pointed out that it would reduce revenues by $32.7 billion over 10 years, according to the Joint Committee on Taxation. He went on to say, “approximately two-thirds of the tax benefit from [the bill] will accrue to taxpayers earning $100,000 or more.”
Mr. Levin noted that the White House has issued a Statement of Administration Policy that “strongly opposes” the Bill and confirmed that it would be vetoed if presented to President Obama for his signature. The Statement added that the Bill “would repeal a provision of the Affordable Care Act that limits a regressive, poorly targeted tax break for health care spending.
If you would like to see the results of the final House vote for this bill you can view them here.
Do you think this has any chance of actually becoming law?
Bruce – Your Host at The Tax Nook
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