Seniors With Medical Deductions
One example of itemizing deductions includes the cost of medical and dental expenses. For seniors with medical deductions, these include health insurance premiums. In the past, the medical expense deduction had a limit to the amount that exceeds 7.5% of a taxpayer’s adjusted gross income (AGI). I know this is not the most exciting subject; yet, is important that you pay attention to this change.
First, a senior is anyone age 65 or older. When the Affordable Care Act became law, the percentage of AGI, known to reduces medical expenses, rose to 10%. This year, 2016 is the last year for seniors with medical expenses to deduct at the 7.5% threshold. For those who are married, and either you or your spouse are seniors, the 7.5% still applies for now.
AGI Limitations in 2017 for Obamacare
Here is the issue, it is all going to change beginning next year for seniors with medical deductions. This lower percentage of AGI for seniors expires after 2016. This means that starting in 2017, the limitation percentage for seniors with medical deductions becomes 10%. This will result in a much lower medical deduction for seniors; thus, medical expenses will have to be at least 10% of your AGI.
It is true, nothing can be done about the higher percentage of AGI reduction that begins in 2017. However, seniors with medical expenses can still take advantage of the lower 7.5% of AGI limit. How? By maximizing their medical deductions for 2016.
Seniors with Medical Expenses Take Advantage in 2016
Attention seniors with any unpaid medical expenses, you can capture these deductions in 2016. As seniors you can benefit from the 7.5% limit in its last year, just include these types of medical expenses that qualify:
- Discretionary medical treatments.
- Prescriptions you can stock up on.
- The replacement of prescription eyeglasses.
- Dental work that needs to be done. Or,
- Other medical expenses that you can take care of and pay for in 2016.
At Worthtax, we just recommend you keep it reasonable. In other words, you know that face lift or tummy tuck you’ve been thinking about? Well, it is elective cosmetic surgery. Nope it does not qualify as deductible medical expenses.
Be careful! Make sure you will benefit on your taxes from this decision. Incur medical expenses ahead of time. In other words, do all you can to get your medical procedures done in 2016. And try to avoid waiting for the new year in 2017 for that dental procedure you need. That is to say, ask yourself, do you ordinarily claim the standard deduction instead of itemizing deductions on your tax return? Consider, will accelerating your medical expenses into 2016 may result in any tax savings for you? If you have questions, we invite you to give Alex Franch, BS EA a call at 781.849.7200. He can answer any questions you may have. Alex is an enrolled agent with the IRS with over a decade of experience.
