In 2018, there were two hurdles to claiming a Medical Expense Deduction.
First, you had to spend more than 7.5% of your adjusted gross income on medical expenses. If you had a combined income of $100,000, you would first have to spend $7,500 on medical before you could claim any expenses. And that’s unreimbursed medical expenses- If you paid for any of it with an HSA, FSA or got any other kind of reimbursement, it wouldn’t count towards the total.
Second, even if you qualified for a medical deduction, you still needed to have itemized expenses higher than the standard deduction. If the combined total of your medical expenses, taxes paid, mortgage interest, and charitable donations were lower than $24,000, then it would be better for you to take the Standard Deduction. Medical expenses would only matter if you itemized.
These hurdles are going to be even harder to clear in 2019. The threshold for Medical Deductions under the new tax bill goes up to 10% of your adjusted gross income in 2019. A couple with income of $100,000 would need to spend $10,000 out of pocket on medical bills before they could deduct anything. On top of this, the standard deduction is also increasing slightly, from $24,000 to $24,400 for a married filing joint return.
As you can see, for most people below the 10% threshold on medical expenses who will probably take the standard deduction, keeping a detailed track of medical expenses may not be worth the effort in 2019.
Since it is less likely to claim a medical expense deduction in 2019, this also makes contributions to Health Savings Accounts (HSAs) much more attractive as a tax strategy. If you have questions about the tax benefits of setting up a Health Savings Account, schedule a Pro Advisor meeting today! Visit our website at https://www.clergytaxnet.com/resources/proadvisor/ for more information.
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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