Most of the provisions of the recent tax legislation passed by Congress called the “Tax Cuts and Jobs Act 2017” go into effect beginning on January 1st of 2018 (tax year 2018).
There are others, like the tax treatment of alimony for divorce or separation agreements executed after December 31, 2018 that won’t go into effect until tax year 2019.
There is one important provision which is effective for tax year 2017 which may impact the tax return you file this spring.
This provision regards the percentage of gross income used to exclude out of pocket medical expense deductions on Schedule A of your individual (1040) tax return, should you itemize your deductions.
Beginning in tax year 2013, with the passage of the Affordable Care Act (ACA), also known as “Obamacare”, an exclusion, equal to 10% of your adjusted gross income, which appears on line 37 of page 1 of your 1040, is used to reduce the dollar amount of your eligible medical deductions.
Prior to the passage of the ACA, the exclusion percentage was 7.5%. With the passage of the “Tax Cuts and Jobs Act of 2017”, the 7.5% exclusion is reinstated for tax years 2017 and 2018.
Without additional legislation, this provision will expire on January 1st, 2019.