SB 1137: Personal income tax: deduction: medical expenses.

The Personal Income Tax Law, in conformity or modified conformity with federal income tax laws, allows various deductions in computing the income that is subject to the taxes imposed by that law, including a deduction for the medical and dental expenses paid during the taxable year, not compensated for by insurance or otherwise, for the medical or dental care of the taxpayer, spouse, or a dependent, to the extent that such expenses exceed 7.5% of federal adjusted gross income.

This bill would, for taxable years beginning on or after January 1, 2026, instead allow that deduction to the extent that those medical and dental expenses exceed 4% of federal adjusted gross income. and before January 1, 2031, allow a deduction from adjusted gross income for the costs of medical care, as defined, of a qualified taxpayer to the extent the costs exceed 4% of the qualified taxpayers federal adjusted gross income. The bill would limit the deduction to $5,000. The bill would define qualified taxpayer for this purpose to mean an individual with adjusted gross income that does not exceed 300% of the federal poverty level and who does not take an itemized deduction for costs of medical care pursuant to the above-referenced provisions on their California income tax return.

Existing law requires any bill expanding an existing tax deduction to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements. authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would take effect immediately as a tax levy.