Tax season is underway. And, since this year represents the first time most Americans are filing since Congress overhauled the tax code in late 2017, there’s a lot that’s new.
The Tax Cuts and Jobs Act didn’t take direct aim at retirees, so don’t expect any change to, say, the taxation of your Social Security benefits or your required minimum distributions.
Some of the law’s provisions, however, disproportionately affect older adults. Perhaps the biggest is the medical deduction. Nearly 9 million Americans deducted medical expenses in 2015, and nearly three-quarters of them were older than 50, according to an analysis by the AARP Public Policy Institute.
For 2018, tax law lowered the threshold for writing off your medical expenses to 7.5% of your adjusted gross income, from 10%. But that lower level expired last year, and for 2019, it’s going back up to 10% for taxpayers of all ages in order to write off qualifying medical expenses.
Know your costs
Don’t assume that you’ll never be able to claim this deduction. Make sure you’re familiar with all the procedures and services that can qualify for a medical write-off. You can find them in IRS Publication 502. Qualifying home improvements like, say, a wheelchair ramp, are an area that many retirees frequently overlook.
Bunch your costs
If you don’t consistently incur high enough medical expenses in a given year to write them off, consider bunching your spending so that you can at least take the deduction one year. That means, for example, scheduling qualifying elective surgery, the purchase of new hearing aids, and a home improvement for the same year.