Here’s a short example of how this proposed Senate Bill medical expense ceiling change would work:

Let’s assume a taxpayer with adjusted gross income (AGI) of $100,000. The current threshold for the medical expense deduction is 7.5% of AGI, or in this case $7,500. Assume our unmarried taxpayer has $10,000 of medical expense. He is allowed to deduct only the amount in excess of the threshold. In this case, that amount is $2,500 (his medical expenses above the $7,500 threshold). If our taxpayer is in a 28% tax bracket, this $2,500 tax deduction would “save” the taxpayer $700 (28% of $2,500). If the threshold is raised to 10% (in our example $10,000) as proposed in the Bill, our taxpayer would be allowed no deduction for these medical expenses, a net loss of $700.

What if our taxpayer is on the wealthy side, say earning $350,000 per year. Under the current threshold, he would have to have more than $26,250 in medical expenses (.075 times $350,000) in order the have a medical expense deduction. Let’s assume that he did to the tune of $35,000. Using the 7.5% threshold and a 33% tax bracket, the taxpayer could deduct $8,750, resulting in a tax savings of about $2,900. If the proposed threshold (10% of $350,000) goes into effect, the taxpayer in this example would be deprived of the deduction, a net loss of almost $3,000.