The 2017 Tax Cuts and Jobs Act (TCJA) brought about many reforms which benefited taxpayers. One such reform was the reduction in the medical expense deduction floor.
Before TCJA, the limitation was set to go to 10%, so only medical expenses that exceeded 10% of one’s income would be deductible as an itemized deduction. This naturally created a higher tax liability by limiting deductible medical expenses.
TCJA reduced the deduction floor to 7.5% from 10% allowing a bigger portion of your medical expenses to be deducted on Schedule A. This was a temporary measure meant to bring relief to taxpayers and was set to expire in 2019. However, the SECURE Act extended it through 2020 giving taxpayers more time to utilize the medical deduction.
The continued reduction in the medical expense deduction floor allows more qualified medical expenses to be deducted on Schedule A, the itemized deduction form.
Qualifying medical expenses include:
- Costs for medical services from all medical professionals such as physicians, surgeons, dentists.
- Costs for medications prescribed by a medical professional
- Costs for medical devices, equipment and supplies prescribed by a medical professional such as eyeglasses, an oxygen tank and even a walker.
- Costs for health and dental insurance premiums, as long as they’re not reimbursed by your employer. This also includes long-term care and long-term care insurance premiums.
- Transportation and lodging costs for traveling to a health care facility including mileage at a rate of 20 cents per mile as of 2019 but will be reduced to 17 cents per mile in 2020.
Medical expenses that do not qualify include over-the-counter medication and any medical expense not prescribed by a medical professional. The IRS provides a Free Resource to help understand what is an applicable medical expense.
If you have any further questions, do not hesitate to contact your Henry + Horne tax adviser.