Personal income tax: deduction: medical expenses.

Plain English Breakdown

The official source material does not mention any requirement to report on how the change affects tax revenue or taxpayer benefits.

Medical Expense Deduction Change

The bill changes the medical expense deduction threshold for personal income taxes in California, making it easier for some people to claim deductions.

What This Bill Does

• Changes the minimum amount of medical expenses needed to qualify for a tax deduction from 7.5% of federal adjusted gross income (AGI) to 4% of AGI starting January 1, 2026.
• Limits the total deduction to $5,000 per year for qualified taxpayers who earn up to 300% of the federal poverty level and do not claim other medical expense deductions.

Who It Names or Affects

• People in California who pay personal income taxes and have high medical expenses.
• Individuals with adjusted gross incomes up to 300% of the federal poverty level.

Terms To Know

Qualified taxpayer

An individual whose income does not exceed 300% of the federal poverty level and who is not claiming other medical expense deductions.

Adjusted Gross Income (AGI)

The total income earned by an individual before taxes are applied, after certain adjustments have been made.

Limits and Unknowns

• The bill only applies to taxable years starting on or after January 1, 2026.
• It is unclear how many people will qualify for the new deduction limit and reporting requirements.

Official Summary Text

SB 1137, as amended, Valladares.
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 taxpayer’s 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.
The bill would provide findings and declarations relating to the goals of the expansion of the deduction for medical and dental expenses.
This bill also would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

Current Bill Text

Download Bill PDF