Tax Year 2020 % of AGI for Medical Deductions should be 7.5%

Karen Vierra

I've discovered the current % of AGI for Medical Deductions for Tax Year 2020 is 10% in the Quicken Tax Planner, whereas, I believe it should be 7.5%.

I found the following information on the web:

As posted 12/3/20, Your Guide to 2020 Tax Deduction 

https://news.yahoo.com/guide-2020-tax-deductions-141020007.html 

"Medical expense deduction. Qualified health care expenses such as those spent on the diagnosis, treatment or prevention of a disease may be subtracted from your adjusted gross income as itemized deductions. You may only deduct those unreimbursed medical expenses that exceed 7.5% of your AGI. Unnecessary procedures, such as cosmetic surgery, aren't eligible".

Will this be corrected in the Tax Planner?

Jim_Harman

You are right, the Tax Planner is using 10% of  AGI as the floor for medical deductions.

In a test file I entered income of $100,000 and medical expenses of $25,000. The medical expense deduction shows as $15,000, but it should be $17,500 (25,000 - (100,000 * 7.5%))

Unfortunately I doubt Quicken will fix this before 2020 taxes are due. Your best bet for a fix would probably be to contact Support and point out the issue to them.

In the meantime, you may want to correct the Tax planner's calculations by entering an adjustment to your medical expenses in the Tax planner so that the deductible amount comes out right.

markus1957

Probably not; the reduction is a one-off event from the CARES act passed in the Spring and only applies to 2020.

Jim_Harman

You are right, the Tax Planner is using 10% of  AGI as the floor for medical deductions.

In a test file I entered income of $100,000 and medical expenses of $25,000. The medical expense deduction shows as $15,000, but it should be $17,500 (25,000 - (100,000 * 7.5%))

Unfortunately I doubt Quicken will fix this before 2020 taxes are due. Your best bet for a fix would probably be to contact Support and point out the issue to them.

In the meantime, you may want to correct the Tax planner's calculations by entering an adjustment to your medical expenses in the Tax planner so that the deductible amount comes out right.

volvogirl

Back in 2017 the IRS changed back to 7.5% for everyone regardless of age.  In 2013 it had changed to 10% unless you were 65 or older.

volvogirl

Hmmmmm, can you change your age in the planner to over 65?  Maybe Q still has it at 7.5% for over 65.

Karen Vierra

I do have that checked, thank you for asking.

Jim_Harman

Good idea, but no such luck. There is no place to enter age in Tax planner, and changing age in Lifetime Planner had no effect.

Karen Vierra

@Jim_Harman You tell Quicken you're over 65 in the Itemized Deductions Page of Tax Planner:

Jim_Harman

Note that this issue does not affect many people unless they have really big medical expenses that were not reimbursed by insurance. Because the standard deduction is now higher than previously and state and local tax deductions are limited to $10,000, many more people are taking the standard deduction than in previous years. The Tax Planner does take the larger standard deduction and the SALT deduction limitation into account.

But note for this year there is a new deduction of up to $300 for charitable gifts that you can take in addition to the standard deduction (also not recognized by the Tax Planner)

Karen Vierra

@Jim_Harman You're absolutely right about the standard deduction, thank you for your comments.

Jim_Harman

@volvogirl,

Aha. Now I see that checkbox. It affects the size of the standard deduction but not the floor for the medical deduction.