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  1. clydewolf says:

    The PPACA has been affirmed by our Supreme Court. This legislation will have some tax impacts for many tax payers. Perhaps the one item that will impact the largest number of tax payers is the change for the Medical Care Deduction limit.

    When we itemize our medical expenses we can deduct the amount that exceeds 7 ½% of our AGI. Beginning in 2013, the PPACA will have an impact on the amount of medical expenses we can deduct on our 1040 Schedule A.

    Beginning with the 2013 tax year, the threshold limit will increase from 7 ½% to 10% of your AGI. If you have an AGI of $100,000 and deductible medical expenses of $15,000 – in 2012 this would result in your medical deduction of $7,500. ($100,000 * 7 1/2% = $7,500 Threshold. Expenses of $15,000 – $7,500 = $7,500 deduction)

    With the same AGI and the same amount of medical expenses, in 2013 this legislation will reduce your medical deduction to $5,000 ($100,000 * 10% = $10,000 Threshold. Expenses of $15,000 – $10,000 = $5,000 Deduction.)

    The reduced deduction will increase your income tax bill, and could possibly move you into the next higher income tax bracket.

    In 2013, this change will affect those tax filers that are less than 65 years old. Those that are over 65 will have a reprieve until tax year 2017.

    1. jblankenship says:

      Thanks for the excellent explanation, Clyde.

      We definitely have some changes to get used to for 2013’s new limits.

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