The medical expense tax deduction is one of the only retroactive potential tax benefits from the new tax bill. If you itemize your deductions and experienced significant unreimbursed medical costs during 2017 the new lower threshold limit of 7.5% of adjusted gross income may be of benefit to you.
Prior to the passage of the Tax Cut and Jobs Act in December 2017, only qualified medical expenses in excess of 10% of adjusted gross income were eligible for itemized deduction. With the new expansion of the medical expenses deduction, the threshold has been reduced from 10% to 7.5%.
For example, if your adjusted gross income for 2017 is $75,000, the first $5,625 of medical expenses would not be deductible under the new rules. If you incurred $10,000 in medical expenses during the year, you would now be able to deduct $4375, a $1875 bigger deduction than previously.
It’s important to note, this reduced threshold is good only for the 2017 and 2018 tax years. Beginning with January 2019, all taxpayers may deduct only the amount of the total unreimbursed allowable medical care expenses for the year that exceeds 10% of their adjusted gross income.
So what does this mean? If you think you’re likely to itemize deductions and had quite a few medical and/or dental expenses during the 2017 year, for yourself, spouse, and dependents, add up those receipts.
Include unreimbursed prescription costs, durable medical equipment such as crutches, orthodontia, contact lenses or glasses, and any other medical expenses not covered by your insurance or reimbursed elsewhere. The IRS maintains a list of qualified expenses in publication 502 beginning on page 5 if you aren’t sure what to include.
If your total is greater than 7.5% of your adjusted gross income, you can likely reduce your taxes owed with this deduction. Consult your tax professional with any questions or to help you accurately determine the medical expenses deduction for you.