In the eleventh hour, Congress didn’t repeal the deduction for medical and dental expenses as part of the Tax Cuts and Jobs Act (TCJA), as expected. What’s more, it actually gave a holiday gift to taxpayers by lowering the tax “floor” for deducting expenses.
Although this reduction is only temporary — it ends after 2018 — the lower threshold is retroactive to 2017.
In other words, taxpayers may benefit from this tax break on the 2017 return they must file in 2018! Encourage your clients to double-check their records for deductible expenses they might miss the first time around.
For starters, you can only deduct unreimbursed medical and dental expenses above an annual threshold based on your adjusted gross income (AGI). Prior to the Affordable Care Act (ACA), the law known as Obamacare, the limit was 7.5 percent of AGI. But the ACA raised the threshold to 10 percent of AGI with a temporary reprieve through 2016 for senior citizens.
Beginning in 2017, the threshold was scheduled to remain at 10 percent-of-AGI for all taxpayers.
Now the new law returns the threshold to its pre-ACA level. For 2017 and 2018, a taxpayer can deduct expenses based on a floor of only 7.5 percent of AGI.
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About Ken Berry
Ken Berry, Esq., is a nationally known writer and editor specializing in tax, financial, and legal matters. During his long career, he has served as managing editor of a publisher of content-based marketing tools and vice president of an online continuing education company. As a freelance writer, Ken has authored thousands of articles for a wide variety of newsletters, magazines, and other periodicals.