Deductions: Not What They Used to Be
by Bob Williams
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The decision whether to itemize deductions or not has become a little easier to make this year – unfortunately, not for the reason we’d like. Medical expenses now have to total more than 10 percent of a taxpayer’s income before they can be itemized, putting that deduction out of reach on many returns.
Back in the day, it was pretty much common knowledge that if you had sizeable medical expenses over the course of the tax year, you could always itemize to recapture some of that expense.
There were limits, of course. First, your itemized deductions had to be more than the standard deduction in order to make sense for most taxpayers. Then, there was the matter of qualifying for the deduction.
As late as 2012, your qualifying medical expenses were only deductible if they totaled more than 7.5 percent of your Adjusted Gross Income, or AGI. You could deduct whatever was above that 7.5 percent “floor.”
Today, however, what was a floor has become a rather tall step. Your qualified medical expenses now must total more than 10 percent of your AGI, instead of the 7.5 percent of yesteryear. And the deduction you garnered in 2012 for those medical expenses will be out of reach this time around.
To be sure, most taxpayers don’t itemize their deductions, preferring to go for the standard deduction instead. When you file your return this year, it means $6,200 for single taxpayers, $12,400 for couples filing jointly, and $9,100 for heads of household.
Even if taxpayers itemize, though, data suggests most don’t use the medical expense deduction. So who will? Probably small business owners and self-employed taxpayers, although anyone who pays for their own health insurance could stand to qualify, even with the higher requirement.
Older taxpayers also could still benefit, since seniors are exempt from the 10 percent floor through early 2017.
For most of us, though, the brass ring of deduction will be just a bit beyond our reach, leaving us to follow the herd and settle for that standard deduction.
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