AARP Florida Director Jeff Johnson warned hundreds of thousands of older Floridians Wednesday that they could lose thousands of dollars in income-tax deductions next year if Congress moves ahead with a U.S. House plan to impose a “health tax.”
A House tax plan adopted last month would eliminate a current feature of tax law that allows Americans to deduct some of the cost of high medical expenses from their taxable income. As of 2017, taxpayers can deduct qualified medical expenses from their taxable incomes above 10 percent of their income, up from 7.5 percent of income in previous years. A Senate version of the tax plan retains the medical expense deduction at 7.5 percent.
In 2014, more than 634,000 Floridians claimed the medical expense deduction. On average, the medical expense tax deduction saved Floridians paying income taxes at the 25 percent rate more than $2,500 a year on average on their 2014 income taxes. Those in the 15 percent income-tax bracket saved more than $1,500 a year on average on their 2014 income taxes.
“If Congress imposes a health tax, millions of seniors would struggle to afford their medicine, and be forced to dip into their hard-earned retirement savings,” said Johnson. “Older Floridians depend on the health tax deduction so they can afford to pay for their prescription drugs, doctors, hospitals, hearing aids and more.”
Johnson discussed the health tax proposal in a media conference call Wednesday, joined by Dr. Stephen Burns, a retired physician living in Naples. Dr. Burns has calculated that he will face $1,400 or more in additional income taxes on a modest retirement income of about $37,000 a year (in 2016) if the House provision is enacted into law.
Johnson noted that the health cost tax deduction is especially important to older Floridians earning less than $75,000 a year. Nationwide, about seven in 10 Americans who claimed the medical expense deduction have incomes of $75,000 or less.
The medical expense deduction has been a feature of U.S. tax law for almost 80 years. Since then, health costs have risen very sharply and today form a much larger expense for older Americans. According to the IRS, 56 percent of those taking the medical expense deduction are age 65 or older. Nationwide, Americans in Medicare spend more than $6,000 a year out of pocket on medical care.