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Health care deductions for millions of Americans with high medical costs will end on January 1st if Congress fails to act. Congress must extend the current law that allows  patients to deduct out-of-pocket health spending, once they’ve spent 7.5 percent of their income on such expenses. If Congress does not act, Americans with high out-of-pocket medical costs will pay a large tax increase on their 2019 taxes

Health Care Deductions: What The Current Law Says

This 2017 Federal tax law maintained the 7.5 percent income threshold — but just for two years. As of Jan. 1, 2019, the income threshold was raised to 10 percent of income. For the millions of Americans who suffer from chronic illness and have high medical costs, this tax relief helps offset the high health costs. It provides important tax relief which helps offset the costs of their acute and chronic medical conditions.

Right now, there are bipartisan bills in the House and Senate that would make permanent the 7.5 percent threshold.

If Congress does not pass this legislation by the end of this month, Americans with high cost chronic illness will get huge tax increases for 2019.  At the very least, the current law should be extended, and taken up again after the Holiday recess.

Seniors Most Vulnerable

If the current law is not passed, or at least extended, seniors would be the hardest hit. Right now, about 40 percent of those that claim the 7.5 percent deduction are over age 65.

While Medicare covers a large part of health care costs for seniors, their average out of pocket cost is $5,680.  And Medicare does not cover health insurance premiums, premiums for long-term care insurance, or copays for prescription drugs. Medicare also does not cover dental, vision and hearing services.

In fact, 70 percent of taxpayers who claim the health care deductions have incomes between $23,100 and $113,000 per year. If the income threshold is restored to 7.5 percent, the average annual benefit for seniors will be $480. This $480 would cover Medicare enrollees’ Part D prescription drug premiums or the Part D annual deductible.