Tax Reform And Your Health Care

The Tax Cuts and Jobs Act (TCJA) makes two major changes to health care that could provide some temporary relief for many Americans.

What’s Changed?

First, more Americans should be able to deduct health care expenses realized in 2017 and 2018. The deductibility threshold for out-of-pocket health care costs has been temporarily reduced from 10% to 7.5% of your adjusted gross income (AGI). The income threshold is expected to return to 10% of your AGI beginning in 2019 unless Congress acts.

Second, beginning in 2019, the penalty for not maintaining health insurance that complies with the Affordable Care Act will be repealed. The tax penalty will still be applicable for both 2017 and 2018 tax years however.

While some tax relief is welcomed, health care costs can be a drain on your budget and savings unless they are planned for properly.

Take the following steps to creating a plan that protects your Health, your Wallet and your future Wealth:

Health

First, having major medical insurance is a must. The repeal of the tax penalty could make way for different health insurance plans to be available in the marketplace like short term medical plans or indemnity plans. With more to choose from, however, knowing what you are buying and how it works is even more critical.

Wallet

Second, don’t fall into the cycle of relying on credit cards to get you out of a pinch when a medical bill hits your mailbox. It’s important that you set money aside for your projected out-of-pocket expenses. Review your coverage details and understand your deductible, maximum out-of-pocket cost limits and what you have paid in the past and budget accordingly. If you have a High Deductible Health Care Plan, you may be eligible to save for your out-of-pockets in a Health Savings Account (HSA). HSA’s are a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses.

Wealth

Lastly, take action to keep your financial plan on course. Getting sick or injured can be a pain not just because of medical bills, but health events can also disrupt your ability to stay afloat whether you’re employed or even retired and living on your nest egg. Protect yourself with disability insurance during your working years and long-term care insurance during retirement. These types of insurance policies are designed to help offset costs that come with needs that can often be life changing. 25% of adults over the age of 20 will become disabled before turning 67¹ and nearly 70% of Americans over 65 will require long term service and support during their lifetime.² While savings can help in the short term, being financially secure means having a plan with a long-term vision in mind.

Take Action

The recent tax reform may provide some relief for you this year so take the opportunity to make sure that your health care plan is adequate for your needs. To learn more about your options in health care planning, visit USAA.com/HealthSolutions or call an advisor at 800-531-8722.

1 - http://www.disabilitycanhappen.org/diam/2017/diam2017_factsheet_general.pdf

2- https://www.usatoday.com/story/money/personalfinance/retirement/2017/11/17/retirement-planning-shoul...

Health solutions provided by USAA Life Insurance Company and through USAA Life General Agency, Inc. (LGA) (known in CA and NY as USAA Health and Life Insurance Agency), which acts as an agent for select insurance companies to provide products to USAA members. LGA representatives are salaried and receive no commissions. However, LGA receives compensation from those companies, which may be based on the total quantity and quality of insurance coverage purchased through LGA. Plans not available in all states. Each company has sole financial responsibility for its own products.

The contents of this document are not intended to be, and are not, legal or tax advice. The applicable tax law is complex, the penalties for noncompliance are severe, and the applicable tax law of your state may differ from federal tax law. Therefore, you should consult your tax and legal advisors regarding your specific situation.

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