Bill codifies deduction for medical insurance premiums

Written on Mar 23, 2018

The Ohio Society of CPAs supported the legislature's efforts last week to amend House Bill 24 with clarifying language to R.C. 5747.01(A)(11), codifying an income tax deduction for eligible subsidized health insurance premiums. H.B. 24 passed both the House and Senate on Wednesday, March 21.

Continuing law allows a tax deduction for (a) the premiums an individual pays for an unsubsidized health insurance plan (i.e., a plan for which the individual pays the entire cost) and (b) other "medical care" expenses, provided those expenses exceed 7.5% of the individual's Ohio adjusted gross income. Generally, "medical care" expenses would include amounts paid for subsidized health insurance, but current law specifically excludes subsidized health insurance premiums from the deduction.

Before tax year 2017, Ohio income tax returns and instructions were not in accord with this law, and consequently, taxpayers were able to claim a deduction for certain subsidized health insurance premiums (if such premiums, combined with the taxpayer's other medical care expenses, were greater than 7.5% of the taxpayer's AGI).

Beginning with tax year 2017, the Ohio Department of Taxation amended the tax return and instructions to accord with current law, thereby disallowing the deduction. This change in treatment had been affecting the current return filing season, until the amendment last week.

H.B. 24 reverses this new treatment by codifying the deduction for eligible subsidized insurance premiums, for tax year 2017 and thereafter. It contains an emergency clause, so will go into effect immediately upon the Governor's signature, which is expected soon. The amendment is also retroactive, so it is intended to clarify the law as it existed prior to this change. Therefore, taxpayers who have already filed their 2017 return should be able to file an amended return to receive the benefit of the deduction.

For more information, see pages 8-9 (and footnotes 8 and 9) of the Legislative Service Commission analysis.

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