Senior medical tax deduction advances

The medical expense deduction in state tax law used to be the same as in federal tax law: Medical expenses that exceeded 7.5 percent of a taxpayers' adjusted gross income could be deducted.

The Republican-penned state tax reform passed in 2013 eliminated that deduction as of the 2014 tax year. Sponsors of the overhaul pointed out that they had doubled the standard deduction and believed most would break even. But it hasn't worked out that way for many senior citizens, especially those living in continuing care facilities that can easily cost $60,000 or more per year.

Many of those seniors suffered from sticker shock when they filed their 2014 taxes this spring. Lawmakers were inundated with calls and messages from constituents who owed state taxes for the first time, ranging from hundreds to thousands of dollars.

House Bill 46 would reinstate the deduction but only for senior citizens. Residents under 65 would not qualify.

The cost of the deduction is estimated at $40.7 million next year. However, according to legislative staff, in 2017 the federal tax code will reduce the deduction. As of tax year 2017, only medical expenses that exceed 10 percent of adjusted gross income, rather than 7.5%, will be deductible. Assuming the state follows that federal change, the cost to the state will be much less – between $10 million and $12 million per year.

Bill sponsor Rep. Rick Catlin, R-New Hanover, read from emails he received from angry seniors, one of whom said he’s telling his friends that “North Carolina is not a senior citizen friendly state” for retirement.

"It is an economic impact on North Carolina. A lot of states work very hard to bring in retirees to grow their population and their businesses. So, in addition to being fair to our senior citizens, it’s good for the state," Catlin said.

Rep. Jonathan Jones, R-Ashe, spoke in favor of the bill. Unlike a previous meeting, no one spoke in opposition. The vote was unanimous, sending the bill to the House Finance Committee.

"I think it's wonderful that we have gotten this far," said senior advocate Sindy Barker, 73, who attended the meeting with her husband, Brad, 82.

"Obviously, Finance is going to be the big hurdle that we need to get over, but I think we are gaining support among legislators and certainly among other people," Sindy Barker said.

She said residents of the Carol Woods development in Chapel Hill where she lives are comparing notes – and tax bills – and contacting their lawmakers about their concerns.

"It's a big problem for us," she said.