Color of Money: GOP tax plan would take away financial lifejacket for seniors
WASHINGTON -- Many seniors are scared right now that the Republican tax plan, if passed, will eliminate an important deduction that helps them defray the high cost of medical care.
Under current tax law, if you itemize, you can deduct medical expenses for yourself, your spouse and your dependents if the cost exceeds 10 percent of your adjusted gross income.
The proposed bill would do away with this deduction.
What is of particular concern for some seniors is that this means they would be losing a deduction that covers payments for nursing homes, assisted living or inpatient hospital care.
Nearly 8.8 million households filed 2015 returns that claimed the medical and dental expenses deduction, according to the IRS. AARP's Public Policy Institute says that 49 percent of those who took the deduction had income of less than $50,000, and 69 percent had income under $75,000.
I asked readers to comment on what they thought of the plan to eliminate the deduction for medical expenses.
"This will be catastrophic for my 90- and 93-year-old parents, who live in assisted living," wrote Marla Payne Wise from Canton, Georgia. "My husband and I also itemize our medical expenses, which will only get higher as we age."
John McCreight of Hilton Head Island, South Carolina, estimates the loss of the deduction would cost him an extra $6,570 in taxes. "I hope and pray that whatever changes are made, this deduction will stay."
One Virginia resident said the deduction is important to her 90-year-old widowed mother, who has numerous health problems and is in an assisted-living facility.
"My parents were committed to serving their community through education, and they provided for their children on the modest salaries of two public school teachers," the reader wrote, asking for anonymity. "Thanks to their lifelong habit of careful saving and investing, my mother is able to cover her own long-term care expenses through her pension, Social Security, and investment portfolio. However, this is possible only because she can deduct so many of her long-term care and other medical costs. If the medical deduction were taken away, many of the funds that currently go toward her support would be eaten up by taxes, thus depleting her assets more rapidly -- and with a concurrent rise in her medical costs as she further ages. Congress needs to understand that this greatly increases the probability of her outliving her savings, and this in turn would increase costs to the government for her care (state-sponsored assistance and/or Medicaid) -- whereas now she has the means to pay from her own resources."