Tax Reform & The Medical Expense Deduction | H&R Block

January 30, 2018 : Gil Charney

The medical expense deduction was created to help taxpayers with hefty medical expenses. Here are the general rules under prior law:

  • Taxpayers who itemized could deduct qualified out-of-pocket medical expenses that were over 10% of their adjusted gross income for the year.
  • Qualified costs included expenses paid for diagnosis, cure, mitigation, treatment, or prevention of disease, including dental costs.
  • The costs must have been incurred for the taxpayer, the taxpayer’s spouse, or dependent.
  • Taxpayers could only deduct medical expenses paid in the same tax year as the return.

The Tax Cuts and Jobs Acts (TCJA) preserves the deduction for medical expenses, and changes the floor to 7.5% for tax years 2017 and 2018. So, taxpayers can now deduct qualified medical expenses that are over 7.5% of their adjusted gross income for the year – including the 2017 tax return due April 17, 2018. For tax years after 2018, the floor will return to 10%.

With medical expense deduction tax reform, some taxpayers who previously itemized will be better off taking the larger standard deduction, including taxpayers who can deduct medical expenses.

For an estimate of how the TCJA may affect you, visit our tax return and tax reform calculator. Keep in mind that this is an estimate – taxpayers should seek advice from a tax professional when trying to determine how the tax reform changes will affect their medical deductions.

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Gil Charney

Gil is the Director of Tax Law and Policy Analysis for The Tax Institute at H&R Block.