Just to be clear, you can still deduct medical expenses (I think it is being discussed as anything over 7.5% of AGI (current it's anything over 10% of AGI).
The problem is most retirees are not going to hit the standard deduction at $24K, so those excess medical expenses are effectively not a write-off any more.
Oh OK, thanks for the clarification. I wish that in increasing the standard deduction they left the personal exemptions alone. To me it looks like they were trying to hide the overall effect.
” Just to be clear, you can still deduct medical expenses (I think it is being discussed as anything over 7.5% of AGI (current it’s anything over 10% of AGI).”
NO, the current deductible medical expense amount is anything over 10% of the AGI, but 7.5% if you are over 65/70? i think the proposed senate tax bill keeps the medical expense deduction, but the house bill eliminates it.
“The problem is most retirees are not going to hit the standard deduction at $24K, so those excess medical expenses are effectively not a write-off any more. “
NOT QUITE SO.
the standard deduction is being not quite doubled [for individuals, it would go from $6,350 to $12,000, and for married joint filers, it raises that deduction from $12,700 to $24,000], but then they are eliminating the individual personal exemptions [of $4,050 per person] for yourself, your spouse and your dependents; thereby, reducing the doubled standard deductions real net worth to $7,950 for singles [a real net increase of $1,600 from existing std deduction] and to $15,900 for joint filers [a real net increase of $3,900 from the current std deduction]. A couple with 2 children will have their $24,000 doubled standard deduction reduced by $16,200 for a real net reduction of $7,800. so they give with one hand but take away with the other. in addition, they are eliminating the extra deduction for those over 65 or blind.
also, don’t forget that if you take the standard deduction, you cannot then itemize; therefore, giving up the normal deductions for medical expenses, long term care insurance expenses, state and local taxes, property taxes [under the senate bill], mortgage interest deduction limits, student loan interest deductions, moving expenses, alimony, dependent care assistance accounts, casualty and theft losses, unreimbursed job expenses and tax preparation fees.
more details:
further details about this “wonderful” tax grab:
Exclusions and exemptions. The measure would repeal personal and dependency exemptions (which is $4,050 per individual in 2017), exclusions for employee achievement awards, employer education assistance, qualified tuition programs, dependent care assistance, qualified moving reimbursements, and adoption assistance. Contribution to Coverdell education savings accounts would be barred, but funds in existing accounts could be rolled over to 529 plans.
Deductions.
Certain deductions from gross income as well as itemized deductions would be eliminated. Deductions from gross income set to be axed include the alimony deduction (for divorce or separation agreements entered into after Dec. 31, 2017, student loan interest (although the Senate version would retain this deduction), interest on U.S. savings bonds redeemed for higher education, the moving expense deduction, the deduction for contributions to Archer medical savings accounts, out-of-pocket educator expenses, and expenses of performing artists and certain government officials.
Itemized deductions on the chopping block include the medical expense deduction, state and local income or sales taxes, the casualty and theft loss deduction (except for casualty losses in federally-declared disaster areas), and miscellaneous itemized deductions for tax return preparation and unreimbursed employee business expenses.
Tax credits.
The bill would repeal the credit for the elderly and permanently disabled, the credit for mortgage certificates, and the credit for plug-in electric vehicles. The bill would eliminate the lifetime learning credit by consolidating it into the American opportunity credit. The credit would be available for five years of higher education (instead of four years), but the amount in the fifth year would half the usual maximum (including the amount eligible for the 40 percent refundable portion of the credit).
Now look at its impact on the economic strata of taxpayers to see who benefits the most:
“...the highest-income taxpayers (0.1 percent of the population, or those with incomes over $3.7 million in 2016 dollars) would experience an average tax cut of nearly $1.1 million, over 14 percent of after-tax income. Households in the middle fifth of the income distribution would receive an average tax cut of $ 1,010, or 1.8 percent of after-tax income, while the poorest fifth of households would see their taxes go down an average of $110, or 0.8 percent of their after-tax income.”