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What’s New for the Medical Expense Deductions in 2018 and 2019?

Have you noticed an increase in health care costs recently?  Tax breaks related to health care that you can take are more important than ever.  Unfortunately there are thresholds for deducting medical expenses that were already difficult for many taxpayers to meet, and it may be even harder to meet in 2019.

The Tax Cuts and Jobs Act (“TCJA”) went into effect in 2018.  It also temporarily reduced the 2018 threshold from 10% of adjusted gross income (“AGI”) to 7.5% of AGI.   For 2019, the AGI threshold returns to 10%. Only qualified, unreimbursed expenses exceeding the threshold can be deducted.

Medical expenses eligible to be claimed as an itemized deduction include amounts paid for: diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body.  This includes the costs of equipment, supplies, diagnostic devices needed payments for medical services rendered by physicians, surgeons, dentists, prescription medicines and drugs.  Except for insulin, over-the-counter medicines and drugs are NOT deductible.

Reminder:  in order to take advantage of medical expense deduction, a taxpayer is required to itemize deductions.  Itemizing saves tax only if your total itemized deductions exceed your standard deduction. With the TCJA’s almost doubling of the standard deduction for 2018 through 2025, many taxpayers that typically itemized may no longer benefit from itemizing.  Standard Deduction Taxpayers with a large amount of medical expenses should still track your out-of-pocket costs as they may benefit from the Wisconsin state itemized credit for allowable medical.   One other strategy to consider:  think about bunching in the same calendar year all of your medical and charitable expenses (i.e., every odd year); by doubling up, you may get the tax benefit of itemizing in the odd years and claiming the standard deduction in the even years!

If you have further questions regarding this topic or any changes related to TCJA, please contact your Wegner CPAs tax advisor.


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