The House Republicans are proposing a tax bill that would end the tax deduction for medical expenses. This tax deduction benefits people whose medical spending represents more than ten percent of their adjusted gross income. Given high health care costs, almost nine million middle and low-income people benefit from the deduction; according to AARP, most of them are over 65.
Sarah Kliff explains for Vox that out-of-pocket costs for health care services and prescription drugs, including deductibles, as well as the cost of a joining a weight-loss club, are tax-deductible medical expenses as defined by the IRS. And, people who work for themselves can usually include the cost of their health insurance premiums as a tax-deductible medical expense if their total medical spending is more than 10 percent of their adjusted gross income.
Unlike some tax deductions, many working families benefit from the medical expense deduction. Three percent of Americans with annual incomes under $20,000 take the medical expense deduction as compared to one percent of people earning $1 million or more. To put these numbers in context, in 2014, just over 60 million people, earned under $20,000 a year. About 130,000 Americans earned over $1 million in 2014.
AARP is lobbying against the elimination of this tax deduction because it benefits millions of older people with high health care costs, including people needing long-term care. People with incomes under $20,000 who use the medical expense deduction claim an average of $9,136 in medical expenses.
Bloomberg News reports that the Senate tax proposal keeps the tax deduction for medical expenses. The Senate Finance Committee will begin considering the tax proposal next week; it is not clear whether the medical expense deduction will ultimately stay or go.
Whatever the future of the medical expense tax deduction, given the GOP control over both houses of Congress and the GOP desire to lower tax rates for the wealthy, the data suggest that the tax bill will drive up taxes for many middle and working class families.
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