It’s not easy to qualify for a deduction for medical and dental expenses on your tax return. But once you clear the threshold established in the tax laws, any excess is pure tax gravy.
For starters, you can deduct unreimbursed medical and dental expenses only to the extent the annual total exceeds 10 percent of your adjusted gross income (AGI). The threshold was raised in 2013 from 7.5 percent of AGI as part of the Affordable Care Act, the healthcare law known as Obamacare.
Taxpayers ages 65 and older could still claim deductions based on 7.5 percent of AGI through 2016, but this reprieve is no longer available.
The deduction is figured out on lines 1-4 of Schedule A (Form 1040) for 2016.
For example, suppose you’re 50 years old and had an AGI of $100,000 in 2016. If your unreimbursed medical and dental expenses totaled $9,500, you can’t claim any deduction because you didn’t exceed the threshold of 10 percent of your AGI, or $10,000. Conversely, if you had $11,000 in unreimbursed expenses, you may write off $1,000 on your 2016 return.
But the winds of tax reform are swirling in Washington. Under a bill recently introduced in the House to repeal and replace Obamacare, the 7.5 percent-of-AGI threshold would have been reinstated for all taxpayers, beginning in 2018. However, the bill was scrapped last week when it failed to generate enough support, but this provision could be included in similar legislation proposed in the future.
On the other hand, Republican leaders have advocated a complete repeal of certain itemized deductions, or at least a dollar ceiling on the total amount of deductions. President Trump has also proposed limiting itemized deductions to $100,000 for single filers and $200,000 for joint filers. It’s not clear when either of those crackdowns will take effect, but the most likely scenario would be next year.
Suffice it to say, if you have a shot at a medical expense deduction in 2017 – even if it’s a long shot – go for it. Start by scouring your records to find deductible expenses that might easily slip through the cracks. This may include health insurance premiums and copays that come out of your own pocket, the cost of prescription drugs, and transportation and lodging relating to medical care (within certain limits).
But be aware that you can’t deduct the costs of over-the-counter medicines, toiletries, cosmetics, a program and food for your general health improvement, or most cosmetic surgery.
If it goes down to the wire and you’re close to the threshold but have not quite cleared it, consider paying elective expenses in 2017 that will push you over the top. For instance, you might schedule a routine dental cleaning or medical exam at the end of the year. Or you may finally purchase those prescription sunglasses that someone in the family needs.
Because the jury is still out on potential tax reforms, only make the tax moves that make sense under the current law. If and when legislation is enacted, you can adjust accordingly.
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...