The new Trump Tax Plan may look intimidating, but the good news is that this new tax plan can actually help you save on healthcare expenses. This is great for seniors and their families who may have high healthcare costs or be paying for senior living.
Learn more about the new tax plan and how it can help you save on healthcare expenses.
Increased Deductions for Healthcare in 2019
Healthcare is a big expense for retirees and under new tax laws, you’re allowed to deduct medical expenses that exceed 7.5% of your adjusted gross income (AGI).
Since the average 65-year-old-couple in the 21st century is expected to spend $400,000 on medical costs in retirement and $5,000 a month on senior living costs according to recent Genworth data; this deduction can help put money back into the pockets of America’s seniors.
Change can bring uncertainty, but if you do your taxes right you might be able to save on your healthcare expenses.
For seniors whose deductible expenses exceed the increased standard deduction and itemize, taxpayers will be able to claim more qualified medical expenses than previous years. The new tax plan keeps the deduction rules for medical expenses but lowers the income threshold for these expenses from 10% to 7.5%. According to the new tax plan, this is only for the 2018 tax year and the threshold will revert to 10% in 2019 the unless Congress acts to extend it.
This means if your AGI is $60,000 and you spend $16,000 of it on healthcare, you’ll have an $11,500 deduction on your hands, which could be enough to make itemizing worth it when it comes to taxes. Calculate how much you spent on health insurance, long-term health insurance premiums, Medicare premiums, nursing home costs and other out-of-pocket expenses to see if the total exceeds the medical expense threshold.
There are some important rules to keep in mind, though:
You can’t “double dip” and count expenses paid for with health savings account or tax-advantaged flexible spending dollars.
You can’t take this tax break if you opt for the standard deduction – it only applies if you itemize all of your deductions.
Ways to Be Proactive When Filing Taxes
Seniors can be especially vulnerable when it comes time to file taxes as they have fewer deductions and dependents and don’t always know the benefits available to them. Caregivers often get drained financially because they often have to cover loved ones’ expenses and even have to eliminate their work hours or quit to care for their parents or senior loved ones.
There are many changes to taxes this year, so it’s always a good idea to get an expert’s help. There are also many caregiver deductions you may not be aware of and specifics about flexible spending and health savings accounts.
Getting professional help offers peace of mind. An expert CPA or financial advisor can help answer any tax plan questions and provide valuable expertise for your unique situation.
What do you think about the new tax plan and how it will impact healthcare? We’d like to hear from you in the comments below.