Killing medical tax break will hammer middle-class seniors

Republican lawmakers want to cut taxes for corporations and wealthy people by $1.3 trillion – and they seem to want seniors to foot a good chunk of the bill.

Their 2018 budget plan would chop $473 billion out of Medicare and $1.3 trillion from Medicaid. But the House tax plan also calls for elimination of the itemized deduction for high medical expenses.

The deduction allows taxpayers who itemize to deduct medical expenses exceeding 10 percent of adjusted gross income. This is helpful to anyone dealing with disabilities, acute or chronic conditions or long-term care and assisted living costs.

But the medical expense deduction is especially useful for older people, for the simple reason that they are more likely to struggle with acute and chronic health problems. And it is used mainly by middle-class households. Nearly half (49 percent) of taxpayers who deducted medical expenses in 2015 had income below $50,000 according to analysis of IRS records by the AARP Public Policy Institute; 69 percent had income less than $75,000 (chart).

The importance of the deduction is growing, because the number of underinsured Americans is rising. At the end of 2016, 28 percent of adults who had health insurance were underinsured, according to the Commonwealth Fund – a percentage that translates to 41 million people. Commonwealth defines “underinsured” as people whose out-of-pocket health expenses are 10 percent or more of household income, and the number has more than doubled since 2003.

Learn more at Reuters Money.

 

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