What is a Medical Expense Deduction AGI Threshold?
One of the most contemplated deductions for the average US tax payer is the Medical Expense Deduction. People get sick, and often pay some of their medical expenses out of pocket, either because they are self-insured, underinsured or uninsured. When this happens the powers that be decided that the taxpayer needs a break. Historically this break was for any medical expense that exceeded 7.5% of the tax payer’s adjusted gross income (total gross income minus specific deductions), but for the 2019 tax year (i.e. filed April 2020 for most of us) this threshold is going to 10%. As you will see in a minute this is a bit of a “back to the future” – we have been here before.
What Qualifies as a Medical Expense for the Deduction?
Basically, these are expenses that are incurred to alleviate or prevent a medical or mental defect or illness, including expenses related to dental and vision.
Where was the Medical Expense Deduction AGI Threshold Historically?
The following is the 10-year history:
Tax Year Ending December:
2018 – 7.5%
2017 – 7.5%
2016 – 10%
2015 – 10%
2014 – 10%
2013 – 10%
2012 – 7.5%
2011 – 7.5%
2010 – 7.5%
2009 – 7.5%
Which Tax Form Captures the Medical Expense Deduction?
The deduction is captured on Schedule A (Form 1040).
How to Recapture a Previous Years’ Medical Expense Deduction?
As is often the case, we US tax payers don’t always get it right the first time. If you believe that you have not captured all of a previous years’ medical expense deduction that you are entitled, then you can file an amendment to your old tax return. To learn more about filing a tax return amendment, click here.
To sum it all up, the 2019 Medical Expense Deduction AGI Threshold is going back to 10%, a level where we were historically during the Obamacare years. For many tax payers this means that you won’t be able to use this deduction, but if you are one of those that do, this could be an important one for you.