FINANCE
Medical expense deduction in
2018: Tax reform lowers threshold
If you itemize, you should note the reduced
medical deduction threshold for 2018. This year,
you can deduct qualified medical expenses ex-
ceeding 7.5 percent of your adjusted gross income
(AGI). Next year, the threshold for the medical
expense deduction returns to 10 percent of AGI.
(The Tax Cuts and Jobs Act of 2018 also allowed
the 7.5 percent threshold to apply retroactively to
BRUCE
LINGER (CFP, the 2017 tax year.)
So, if you’re considering surgery or dental work
CRPC, CCFS)
in the future that could incur sizable out-of-pock-
et expenses, it might be better from a tax standpoint to sched-
ule these procedures for 2018, instead of 2019.
What types of unreimbursed expenses qualify for the deduc-
tion? The list is long. For starters, the IRS says that these types
of expenses may qualify as tax deductible:
• Out-of-pocket fees to medical and dental professionals,
psychiatrists and psychologists, as well as certain non-
traditional medical practitioners
• Money spent to participate in a weight-loss program in
response to a doctor-diagnosed condition or disease
• Payments for prescription drugs and insulin
•
Payments for smoking cessation programs and prescrip-
tion drugs to facilitate nicotine withdrawal
• Money spent on inpatient treatment or acupuncture at
a rehab facility
• Money spent on inpatient hospital care or residential
nursing home care
That last item deserves further explanation regarding nurs-
ing homes. If a taxpayer is in a nursing home first and fore-
most to receive medical care, the IRS says that the cost of that
care and any lodging and meal expenses borne by the taxpayer
are deductible. Should the taxpayer reside in a nursing home
primarily for other reasons, the IRS limits the deduction to the
medical care provided.
Other potential medical expense deductions are worth not-
ing. You can, of course, deduct payments made for healthcare
aids such as wheelchairs, false teeth, service animals and guide
dogs, hearing aids, contact lenses and reading or prescription
eyeglasses. In addition, you can usually deduct insurance pre-
miums that you paid for insurance policies covering medical or
long-term care (as opposed to premiums paid on these policies
by your employer). Lastly, you can often deduct transportation
costs incurred related to qualified medical expenses: bus, train
and plane fares; gas expenses; parking fees and tolls.
Which expenses don’t qualify? The cost of basic toiletries and
toothpaste cannot be deducted; the same goes for cosmetics.
Expenses for cosmetic surgery are usually not deductible, and
neither are expenses for wellness programs or vacations. Non-
prescription, over-the-counter drugs or medicines are nonde-
ductible. Nicotine patches and gum may not be deducted, un-
less they have been prescribed. Burial and funeral expenses are
also ineligible for the medical expense deduction.
Talk to a tax professional about your possibilities. You may
find it advantageous to itemize in 2018 using Schedule A so that
you can claim medical expense deductions and take advantage
of what could be the last year for the 7.5 percent threshold. Or,
you might find that taking the newly enlarged standard deduc-
tion makes more financial sense. If you think your household
will have significant medical expenses this year, it might be
wise to compare the options.
Bruce Linger (CFP, CRPC and CCFS) is a registered representative
and investment advisor representative for Lincoln Financial Ad-
visors Corp., a broker-dealer (member SIPC) and registered in-
vestment advisor offering insurance through Lincoln affiliates
and other fine companies. His office is at 61 S. Paramus Road,
Suite 425, Paramus. For more information, call 201-556-4564.
This information should not be construed as legal or tax advice.
You may want to consult a tax advisor regarding this informa-
tion as it relates to your personal circumstances. The content of
this material was provided to you by Lincoln Financial Advisors
for its representatives and their clients.
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NEW JERSEY COPS
■ NOVEMBER 2018