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Senators Push Health Tax Relief

Proposal would delay partial loss of medical expense deduction

Medical expense deduction

Bjarte Rettedal/Getty Images

The average Medicare beneficiary spends more than $6,000 a year on out-of-pocket health care costs.

A bipartisan group of U.S. senators Wednesday introduced a bill that would roll back a tax increase for taxpayers over 65, preventing them from having to spend at least 10 percent of their incomes on medical expenses before being able to deduct those costs.

Until 2013, all taxpayers could deduct many out-of-pocket medical expenses once they spent 7.5 percent of their incomes on health costs. For Americans under 65, that threshold was increased to 10 percent in 2013. In January of this year, that higher limit was applied to all taxpayers, including those over 65.

The change affects millions of seniors with very high health care costs, especially middle-income Americans who face financial strain due to high out-of-pocket medical expenses, according to AARP’s analysis of IRS tax data.

The Seniors Tax Hike Prevention Act, authored by Sens. Sherrod Brown, D-Ohio, Rob Portman, R-Ohio, Bill Nelson, D-Fla., and Shelley Moore Capito, R-W.V., delays the 2017 threshold increase for two years.

“High health costs shouldn’t leave seniors making the impossible decision between putting gas in the car or food on the table and filling needed prescriptions,” said Brown. “Deducting the cost of going to the doctor and buying expensive prescription drugs is a bipartisan solution to help relieve the cost of healthcare for seniors.”

While the overwhelming majority of Americans over 65 have Medicare coverage, the average beneficiary spends more than $6,000 a year on out-of-pocket health care costs. There are many expenses that Medicare doesn’t cover, from dental and vision care to hearing aids to long-term care. Medicare beneficiaries also pay premiums, deductibles and copays.

More than half — 56 percent — of the taxpayers who took the medical expense deduction in 2013 were over 65, according to IRS data. And 51 percent of individuals over 65 who claimed the medical expense deduction had an annual income under $50,000.

“If this needed, bipartisan legislation does not pass soon, older taxpayers with high health costs will face a 2017 health tax hike due to a reduced medical expense deduction,” said AARP CEO Jo Ann Jenkins. “The medical expense deduction helps millions of middle-income older Americans to offset high out-of-pocket health care costs.”