How the 2017 Taxes Lets You Get Tax Breaks
You, like many others, may be confused about how the 2017 GOP tax bill is going to impact your finances. The short explanation is it would let you take this break even on the 2017 taxes. Consider your total out-of-pocket expenses on medical bills in 2017 and if it exceeded 7.5% of your adjusted gross income, you could have a deductible of the amount you paid above that. You need to itemize those deductions in order for you to get this break.
There are a variety of qualifying expenses that range from copays and expenses on prescription medication to travel costs due to medical procedures.
Here is a short guide on the 2017 taxes returns.
Generous Tax Break
When you prepare your 2017 tax returns, do not overlook the generous tax break that you will get for your healthcare expenses. This is what the GOP tax legislation has made retroactive.
Under these laws, if you exceed 7.5% of your adjusted gross income in out-of-pocket medical expenses in the last year, whatever you spent above that threshold would be considered deductible.
This is the major adjustment from 2016. In the previous bill, a 10% floor was laid out for all taxpayers except for seniors who are over the age of 65 and who are already benefiting the lower threshold. In other words, it means that it’s possible that more people will be able to enjoy this tax break. Of course, they would have to itemize their deductions.
According to Lisa Greene-Lewis who is a tax expert, if your other deductions and your total takes the amount over what’s supposed to be your standard deduction, you can get this tax break.
For 2017, $6,350 is the standard deduction for taxpayers who registered as single as well as for married couples filing separately. Couples who file joint taxes have a standard deduction of $12,700. Those who registered as head of household, on the other hand, have a standard deduction of $9,350.
About 8.8 million people in America used the tax break for medical expenses in 2015. This gave them an aggregate $86.9 billion in savings as per the AARP Public Policy Institute. It also appears that 49% of taxpayers who took this deduction, according to the data, had incomes below $50,000. Meanwhile, 69% of them had incomes under $75,000.
The floor of 7.5% applies to your 2017 taxes return as well as that of 2018. In the next year, the threshold will go back to 10% for all taxpayers.
Differences in the Drop of 2017 Taxes
Here is an explanation to better understand how this temporary drop will be different. If you, as a taxpayer, have an adjusted gross income of $50,000, you would need at least $3,750 in medical expenses for you to be eligible for the deduction according to the 7.5% floor. With the 10%, on the other hand, you would need between $5,000 and $1,250 more in your medical expenses if you want to use the deduction.
You should also know that if you have dependents, your expenses related to their medical care would count toward your total. But remember that the only potential deductible would be the amount of qualified costs that goes beyond the 7.5% threshold. There are a variety of medical expenses that would qualify which ranges from copays and prescription eyeglasses to the costs of travel due to medical treatments.
If you are paying for health insurance with after-tax money, you might be able to count your premiums toward your deductible. Some expenses like cosmetic expenses, gym memberships, and other similar expenses are considered nondeductible. This includes expenses for which you will be reimbursed.
Those who are self-employed, it will be a bit different when it comes to health insurance premiums. If a self-employed citizen has a profit, they might be able to write off what they paid for the premiums for health insurance as well as dental and long-term care. This goes for both the insured and their dependents. And because self-employment insurance deductions are considered an adjustment to their income, they would not need to itemize for them to get the deduction. Still, it comes with limitations. The amount of the deduction, for instance, cannot exceed the amount of their profit.
In any case, whether or not you are self-employed, certain medical expenses have limitations in deductibility.