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  1. Taxes
  2. Tax Deductions

Senate Tax Bill Expands the Break for High Medical Costs

Published: Dec 04, 2017 3 min read
Senate Majority Leader Mitch McConnell walking to Senate floor
Senate Majority Leader Mitch McConnell, a Republican from Kentucky, gives a thumbs up while walking to the Senate floor at the U.S. Capitol in Washington, D.C., on Friday, Dec. 1, 2017.
Aaron P. Bernstein—Bloomberg via Getty Images

The Senate tax bill that passed early Saturday morning would preserve the deduction for medical expenses and temporarily lower the threshold for claiming it to 7.5% of adjusted gross income, from the current 10%.

The House version of the tax bill, passed in mid-November, eliminated the medical expense deduction, which is used by roughly 6% of tax filers who have expensive health care needs, including seniors in nursing homes, people with chronic medical conditions, and parents of disabled children.

Now, members of the House and Senate will work to reconcile their two versions of the tax bill, both named the Tax Cuts and Jobs Act, with the goal of passing a final version to send to President Donald Trump for signing into law before the end of the year.

If the Senate provision survives in the final legislation, the medical expense deduction will put more money in certain tax filers’ pockets by lowering the threshold that medical expenses have to clear before tax filers can start deducting them. Examples of medical expenses that people can write off include the costs of medical care in a nursing home, psychotherapy, fertility treatments and seeing-eye dogs.

Critics, however, were not cheering. “The legislation as a whole remains harmful to seniors, largely because it will invite deep cuts to Social Security, Medicare, and Medicaid to close the more than $1 trillion deficit the tax bill will create,” Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, a membership organization, said in a statement to Money.

The Senate's medical expense deduction is temporary, and would lower the threshold only for tax years 2017 and 2018; the threshold would return to 10% for 2019 and beyond. What’s more, the medical expense deduction hurdle for people age 65 and above had been 7.5% until the Affordable Care Act raised it to 10%, effective this year. (Before the Affordable Care Act, the threshold was 7.5% for everyone.)

Mary Johnson, a Medicare and Social Security policy analyst and researcher for The Senior Citizens League, a nonpartisan lobbying organization, calls the Senate medical expense deduction “sort of a sham.” “What they did is prevent an increase that was scheduled under the Affordable Care Act,” Johnson says.

The medical expense deduction is only available to tax filers who itemize their deductions, rather than claim the standard deduction; the Senate tax bill would raise the standard deduction to $12,000 for individuals and $24,000 for married couples filing jointly, and eliminate “personal exemption” that tax filers can currently claim for themselves.