House tax bill would scrap deduction for medical expenses
By Julie Rovner. Kaiser Health News
The tax bill unveiled by Republicans in the House on Thursday would not, as had been rumored, eliminate the tax penalty for failure to have health insurance. But it would eliminate a decades-old deduction for people with very high medical costs.
The controversial bill is an effort by Republicans to revamp the nation’s tax code and provide dramatic tax cuts for business and individuals. However, its future is not yet clear because Republicans, who control both the House and Senate, appear divided on key measures.
The medical deduction, originally created in World War II, is available only to taxpayers whose expenses are above 10 percent of their adjusted gross income.
Because of that threshold, and because it is available only to people who itemize their deductions, the medical expense deduction is not used by many people — an estimated 8.8 million claimed it on their 2015 taxes, according to the IRS.
But those 8.8 million tax filers claimed an estimated $87 billion in deductions; meaning that those who do qualify for the deduction have very high out-of-pocket health costs.
“For many people, this is a big deduction,” said David Certner, legislative counsel for AARP, which opposes the change. AARP has calculated that about three-quarters of those who claim the medical expense deduction are 50 or older, and more than 70 percent have incomes $75,000 or below. Many of those expenses are for long-term care, which is typically not covered by health insurance. Long-term care can cost thousands or tens of thousands of dollars a year.
Sen. Ron Wyden (D-Ore.), ranking member of the tax-writing Senate Finance Committee, called the bill’s elimination of the medical expense deduction “anti-senior.”
But defenders of the bill say the elimination of the deduction should not be seen in isolation.
In an FAQ posted on the House Ways and […]