Tax cuts: Why 600,000 in Florida risk paying more, not less, AARP says

More than 600,000 Floridians who deduct medical expenses on their taxes risk taking a nasty shot in the wallet, senior advocates say  — depending on what happens in a House-Senate conference committee that meets Wednesday to nail down a final bill on tax cuts.

Stephen Burns

It is one piece in a giant jigsaw puzzle advertised as more than $1 trillion in tax relief for companies and people, but folks like Stephen Burns figure it could actually raise their taxes by thousands of dollars a year.

Burns, 72, a retired psychiatrist who lives in Naples, said in an AARP conference call he estimates he would have owed about $1,400 more in taxes on a retirement income of about $37,000 in 2016 without being able to deduct medical costs. They added up to more than $12,000 for medicines and other expenses for himself and his wife, he said.

“It means a great deal,” he said.

Some lawmakers think a deal can be reached by week’s end, with a final version approved by both chambers as early as next week. Crunch time has arrived for details like this one.

The House version eliminates several itemized deductions including medical expenses while increasing the standard deduction. Sponsors emphasized the big picture, defending the package on the House Ways and Means website by saying it means “a typical family of four earning $59,000 (the median household income) will receive a $1,182 tax cut.”

“Our bill lowers the tax rates and increases the standard deduction so people can immediately keep more of their paychecks – instead of having to rely on a myriad of provisions that many will never use and others may use only once in their lifetime,” a Q&A from House sponsors says. “This tax relief will give families the flexibility to use their paychecks for what matters most to them every year.”

But AARP says the House plan disproportionately hurts seniors, especially those who pay for things like costly medication or long-term care. About 70 percent of  the seniors who take the deduction make $75,000 or less per year, advocates say.

“If Congress imposes a health tax, millions of seniors would struggle to afford their medicine, and be forced to dip into their hard-earned retirement savings,” said AARP Florida State Director Jeff Johnson. “Older Floridians depend on the health tax deduction so they can afford to pay for their prescription drugs, doctors, hospitals, hearing aids and more.”

In 2014, more than 634,000 Floridians claimed the medical expense deduction, the group says.   Savings on tax bills averaged $1,500 to $2,500 a year among those in modest income brackets, officials said.

The Palm Beach Post requested a calculation of the likely “net effect” of the House bill on such seniors, factoring in elements like a higher standard deduction, and AARP officials said they were still working on that.

As of 2017, taxpayers who itemize can deduct qualified medical expenses exceeding 10 percent of their income.

The Senate bill preserves the medical deduction, even temporarily lowering the threshold to expenses exceeding 7.5 percent of income.

Any attempt to rewrite the tax code is likely to produce winners and losers, but the ouster of medical deductions hasn’t won unanimous support from taxpayer advocates.

“We definitely prefer the Senate version” on that issue, said Robert Romano, vice president of public policy for Fairfax, Va.-based Americans for Limited Government. The final bill “must include the medical deductions,” he said.