A few days ago, the NC Department of Revenue notified NCACPA they have issued a new e-alert notifying taxpayers that Governor Cooper signed HB 1080 (Session Law 2020-58). As part of this legislation, North Carolina now follows the more favorable 7.5% itemized medical expense deduction threshold, which was extended for federal tax purposes for tax years 2019 and 2020 in the Further Consolidated Appropriations Act of 2020 (“FCAA”). The Department is in the process of drafting a detailed notice to address the update, and that information will be available this week. In the interim, DoR felt taxpayers needed to be aware of this information sooner, rather than later. Thus, the e-alert was issued, and the text of that communication is as follows:
Increased Medical & Dental Expense Deduction for Tax Year 2019
On June 30, 2020, Governor Cooper signed HB 1080 (Session Law 202-58). As part of the enacted legislation, North Carolina now follows the more favorable 7.5% itemized medical expense deduction threshold which was extended for federal tax purposes for tax years 2019 and 2020 in the Further Consolidated Appropriations Act of 2020 (“FCAA”). The Department is drafting additional guidance to address this change.
Taxpayers who have not filed their 2019 North Carolina Individual Income Tax Return, Form D-400, and who itemize North Carolina deductions for tax year 2019 on Form D-400 Schedule S, Supplemental Schedule, may deduct qualifying medical and dental expenses paid during 2019 that exceed 7.5% of adjusted gross income. Taxpayers can calculate the amount they are allowed to deduct on Schedule S by substituting the updated 7.5% threshold number for the 10% threshold number printed on Line 22c.
Taxpayers who have previously filed a 2019 Form D-400 and benefit from this change to the threshold, may file an amended return to recalculate the medical expense deduction (See Form D-400 Schedule S Lines 22(a) through 22(d)). If you have questions, you may contact the Department at 1-877-252-3052.