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 Republican Tax Bill Targets Major Change for Medical Deduction

Now that House Republican leaders have unveiled a massive $1.5 trillion tax reform bill, the long term and post-acute care profession is assessing what impact the Tax Cuts and Jobs Act could have, given that the legislation wants to eliminate a longstanding deduction for those with hefty medical expenses.

The proposal calls for the repeal of the medical expense deduction, a World War II-era allowance for those who spend more than 10 percent of their income on out-of-pocket health costs. Used mainly by the elderly, who are often living in nursing care, the overall number of filers who take the write-off is just 5 percent of all tax filers, according to the Joint Committee on Taxation.

Sources at the American Health Care Association/National Center for Assisted Living (AHCA/NCAL) say they are still reviewing the bill presented to the public on Nov. 2, and note that the plan has a substantial road ahead of it in the congressional committee review process before it can be voted on by the full House.

The tax bill debate over the medical deduction, however, may also present an opportunity for lawmakers to explore ways to make long term care more accessible and affordable, according to AHCA/NCAL sources.

Any House passage must move to the Senate where, as with other major legislation, it could face tough sledding given the slim 52-48 majority Republicans hold. This difficulty was witnessed during the repeated failures to get Affordable Care Act (ACA) repeal accomplished earlier in 2017.

Already some senators, like Sen. Marco Rubio (R-Fla.), have indicated they want the tax reform package to include a popular a $2,000 refundable child tax credit, which in the House bill is placed at $1,600 and is not refundable. Refundable tax credits are treated as tax payments for any given year, and when the total of these credits is greater than taxes owed, an individual receives a refund for the difference.

Other Republicans seek new language on items like pass-through business rates and a review of how mortgage deductions will be capped. Added to this, President Trump continues to call for the repeal of ACA’s individual mandate, which requires everyone to have health insurance.

In introducing the legislation, House Speaker Paul Ryan (R-Wis.) said the average middle-class family would save $1,182 annually from lower individual tax rates and expected big wage increases. “A deluge of recent studies forecast that average households can expect upwards of $4,000 in additional take-home pay thanks to our plan to cut the corporate tax rate,” he said.

Responding from the Democratic side, House Minority Leader Nancy Pelosi (D-Calif.) said the tax bill “seriously undermines the good health of the American people.” She said that many people upset over Republican efforts to repeal the ACA “will be making calls into the Republican districts about the medical tax deduction…”

Review the House Republican tax bill at https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf.

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