The tax plan put forward by the Republican-led House of Representatives would eliminate many current deductions, and getting rid of one of them in particular could deal a serious financial blow to individuals with disabilities or their families. The plan proposes eliminating the medical expense deduction, a change that will affect those paying for costly care.
Currently, taxpayers can deduct certain medical expenses from their income taxes if the expenses add up to more than 10 percent of adjusted gross income. These expenses can include health insurance premiums, deductibles, modifications of the home for someone with disabilities, high-cost drugs, the cost of travel to medical appointments, home health care costs and nursing home fees. Also deductible are medical expenses for an immediate family member (including in-laws) or someone who has lived in the household for a year.
While most taxpayers don't have health care expenditures exceeding 10 percent of their income, many seniors and those with disabilities do. According to the IRS, 8.8 million households — almost 6 percent of tax filers — claimed medical deductions in 2015.
Families with members with disabilities “can find themselves drowning in medical expenses, even if they have health insurance,” Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, told Consumer Reports. “The insurance doesn’t necessarily cover everything” the person with disabilities needs.
In addition to eliminating the medical expense deduction, the tax bill cuts corporate tax rates. The bill’s proponents argue that the tax changes will unleash huge economic growth that will result in higher tax revenue. However, if the bill’s supporters are wrong and the growth in tax revenues is not as large as they expect, the reduction in tax revenues will likely cause sharp cuts in government spending or an increase in budget deficits, or both. A reduction in spending could affect seniors and individuals with disabilities through cuts to Medicaid, Medicare, Section 8, Meals on Wheels, and food stamps.
The House’s tax plan is not final, and the Senate plan preserves the medical expense deduction while delaying corporate tax cuts for a year. The two bills, if passed, must be reconciled. For a USA Today article on the differences between the two proposals, click here.
To read Consumer Reports’ article on eliminating the medical expense deduction, click here.