The North Carolina House voted unanimously in favor of a bill that would open up income tax deductions for taxpayers with hefty medical bills.
Senate Bill 622 secures a lower tax threshold for medical and dental expense deductions for the next two taxable years.
Lawmakers estimate it could save North Carolina taxpayers about $18 million. But taxpayers may not see the full benefits of the extension because the General Assembly’s recess stalls it from becoming law before tax season.
“This legislation saves taxpayers money, and prevents them from having to file an amended income tax return or request an extension,” Senior House Finance Committee Co-Chair Rep. Julia Howard, R-Davie, said Tuesday.
The bill was proposed in response to federal tax provisions passed by the Trump Administration in December.
President Donald Trump signed into law the Further Consolidated Appropriations Act of 2020. It incorporates provisions of the Taxpayer Certainty and Disaster Tax Relief Act of 2019, which allows states to keep the medical expense deduction threshold at 7.5 percent instead of 10 percent, which was scheduled to be implemented for 2019. The threshold will revert to 10 percent for the 2021 taxable year.
“Taking care of this reform now enhances the deduction for people with particularly high medical expenses and avoids an inconvenience for those taxpayers at filing,” Howard said. “Both of those provisions are time-consuming.”
The bill still will have to pass through the North Carolina Senate before it can be sent to the governor for final approval.
Rep. Keith Kidwell, R–Beaufort, who has worked as a tax advisor for more than 30 years, urged his colleagues to forward the law to the Senate before its recess. He said the cost of filing an amended tax return will outweigh the savings for taxpayers.
“This absolutely needs to get done,” he said. “It is the right thing to do. Our tax system is supposed to be equitable. If we don’t recouple this immediately to the feds, it would not be equitable. That would not be responsible by this House or the Senate.”
The Senate vote is expected in late April when the legislature reconvenes.