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Tax Deductions

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Senators passed a bill Wednesday aimed at clarifying the differences in federal and state tax codes. But House Bill 1080, the revenue laws bill, didn’t pass without an amendment Wednesday. Fiscal staff pointed out Tuesday that a reduction in the threshold for medical expense deductions from 10% to 7.5% — matching the state tax code with the federal threshold — created a budget hole.

Sen. Joyce Krawiec, R-Forsyth, said funding was found to balance the budget with the more generous medical expense deduction. The created hole was a difference of $36 million can be filled through the Medicaid Transformation fund. Sen. Ralph Hise, R-Mitchell, the Medicaid Transformation fund has $425 million in it and will need to be paid back in 2023. Krawiec said in a news release that the change “provides extra tax relief to those with high medical expenses this year. I can’t think of a better time for this type of relief than a recession during a pandemic.”

House Bill 1080 would also extend Job Development Investment Grants to Jan. 1, 2030, and extend the natural gas economic development infrastructure cost recovery program to July 1, 2026. “This bill is important to tax practitioners and taxpayers to give them clarity and certainty in regards to the singularities and differences in the federal and state tax codes,” said Sen. Paul Newton, R-Cabarrus.

This story was originally published June 24, 2020 9:45 PM.

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