How Tax Reform Affects the Medical Expense Deduction

October 24, 2018 : Gil Charney

Editor’s Note: This article was originally published on January 30, 2018.

 

The medical expense deduction was created to help taxpayers with hefty medical expenses. Here are the general rules for medical deductions before tax reform:

  • 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 Medical Expense Deduction After Tax Reform

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 2018 tax return due April 15, 2019. For tax years after 2018, the medical expense deduction floor will return to 10%.

What other impacts should taxpayers be aware of? 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 tax reform changes may affect your return, visit our tax refund 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.

Questions About the Medical Expense Deduction or Tax Reform?

Our Tax Pros know all there is to know about taxes and can help with any questions you have about your medical expense deductions, tax reform and more. For more information, schedule an appointment with your nearest H&R Block tax professional.

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Gil Charney

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

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