I’m going to jump to the subject of health care reform, just for a brief minute. Frankly, here is my position on this issue. While I am STRONGLY IN FAVOR of healthcare being available to everyone, I can’t say I agree with the way things have been done recently. (Another topic, for another article!)

It doesn’t take a rocket scientist to see that every time the federal government takes over something, it becomes a HUGE, EXPENSIVE, bureaucratic mess! Can we at least agree on that?

As a tax professional for many years, I have often said that if the IRS started by doing something simple, it would be a good step in the right direction. I bet you’re wondering what I’m talking about. I’ll explain.

As you may or may not know, medical expenses are usually a deductible expense on your tax return. However, for this to be deductible, you must be one of those taxpayers who itemizes deductions in Sch A. Also, your medical expenses (this includes doctor visits, trips to the dentist and eye doctor, prescription drugs, copays, etc.) they are only deductible on your tax return once you hit that magic number (it’s different for everyone) ~ That is, 7.5% of your adjusted gross income (AGI). Did I lose some of you here?

Let me illustrate this to you. Let’s say you have $50K AGI. Simple multiplication: $50,000 x 7.5% = $3,750. Any medical expenses you have that are over $3,750 become a tax deduction on your tax return, but only if you can itemize them. If you cannot itemize, then you do not have the benefit of this deduction. Nice, huh?

So, going back to my original thought from many years ago. If the IRS removed this 7.5% floor and allowed EVERYONE (whether able to itemize or not) to take a deduction for legitimate medical expenses, that would be at least a step in the right direction. Doesn’t this make sense? Well, no?

Well hold on to your hat. That 7.5% floor is slated to become a 10% floor in the near future. Moving in the wrong direction here… Hey, it’s just my opinion!