Seniors may want to spend more on qualified medical expenses by end of the year

Q. I finally had my hearing checked and my wife’s suspicions were confirmed, I need hearing aids. They will cost around $5,000 and I’m considering putting off the purchase until next year since we’ve already had quite a lot of uncovered medical expenses this year. A friend of mine is telling me to get them this year because the allowable tax deduction is better this year than it will be in 2017. He didn’t know the details but was told this by the office manager at his dentist. He has had partial dentures and has been considering implants for awhile and this tax savings seemed to push him to take the plunge. I’m a bit of a cynic and wonder if this just wasn’t a ploy to get him to go ahead and get the implants now so the dentist would get paid sooner than later. I called my audiologist and the office manager there just said “we don’t offer tax advice; get them when you want.” No high pressure sales there but I’d still like to know if there is a tax benefit to getting them this year versus next.

A. There may be a tax advantage to spend more on qualified medical expenses this year than next year so you might want to buy hearing aids and complete any other anticipated medical purchases/procedures before Dec. 31, 2016.

Unreimbursed medical expenses for those under age 65 can be deducted if they exceed 10 percent of your adjusted gross income. This year is the last that those taxpayers age 65 or older and their spouses will be allowed to deduct these expenses that exceed 7.5 percent of their adjusted gross income. In 2017, the threshold is 10 percent for all taxpayers. Adjusted gross income is your taxable income less adjustments such as deductions for IRA contributions and student loan interest.

The unreimbursed medical expenses you can deduct include preventative care, treatment, surgeries, dental care, vision care, glasses, contacts, hearing aids, prescription medications, psychologists and psychiatrists visits. You can also deduct expenses for travel for medical care including mileage on your car, bus fare and parking fees.

You must itemize your deductions to claim the medical expense deduction. If your itemized deductions are not greater than your standard deduction, the amount of your medical expense deduction will not make any difference. The standard deduction for single filers is $6,300 and for those filing jointly $12,600. There is an added $1,250 for those taxpayers age 65 and older.

The following example should help you decide if spending more money this year versus delaying expenditures until next year makes sense from a tax perspective. Assuming you are married, and one or both of you are age 65 or older, and your adjusted gross income is $70,000, you itemize and you have unreimbursed qualified medical expenses of $3,000 so far in 2016. If you spend an additional $5,000 on hearing aids you will have spent a total of $8,000 and be able to deduct $2,750. If you wait until 2017 to make the purchase and have the same total of $8,000 in unreimbursed medical expenses your allowed deduction will be reduced to $1,000.

A consultation with a tax professional is advised.