states with no income tax by 12play


									                            OLR RESEARCH REPORT
   November 4, 2008                                                      2008-R-0591


                              By: Judith Lohman, Chief Analyst

       You asked which states have state income tax deductions for medical
    expenses and what the deductions are.

        The information in this report is based on a summary by the
    Wisconsin Legislative Fiscal Bureau of Individual Income Tax Provisions
    in the States (Informational Paper 4, January 2007). Since the Wisconsin
    report applies to the 2005 tax year, we updated the information by
    surveying state income tax forms and instructions for the 2007 tax year.


       Forty-one states and the District of Columbia have broad-based state
    personal income taxes. Of these, 35 allow taxpayers to deduct qualified
    medical expenses when calculating tax liability. Seven, including
    Connecticut, do not. Of the 35 states that have medical expense
    deductions, 20 have the same deduction allowed under the federal tax
    law and 15 have state deductions that vary from the federal deduction in
    one or more respects.


        When calculating federal taxable income, a taxpayer may deduct
    eligible, unreimbursed medical and dental expenses that exceed 7.5% of
    the taxpayer’s federal adjusted gross income (AGI). Deductible expenses
    include insurance premiums for medical and dental care other than
    premiums already deducted under the self-employed health insurance

Mary M. Janicki, Director                                                              Room 5300
Phone (860) 240-8400                                                   Legislative Office Building
FAX (860) 240-8881                  Connecticut General Assembly        Hartford, CT 06106-1591             Office of Legislative Research     
deduction. Deductible long-term care insurance premiums are limited
based on age. The limits for 2007 were:

                        Age                  Deduction Limit
                        40 or under                   $ 290
                        41 to 50                        550
                        51 to 60                      1,110
                        61 to 70                      2,950
                        71 and over                   3,680

   The limits apply to premiums for each person. The long-term care
policy must also meet certain minimum standards.


   Thirty-four states and the District of Columbia have medical expense
deductions in their state income taxes. Seven states do not. The
remaining nine states have no broad-based state income taxes.

   Of the states with medical expense deductions, 20 use the federal
deduction with no change and 15 deviate from the federal deduction in
certain respects. The most common differences are to (1) allow
additional expenses to be deducted, (2) base the 7.5% exclusion on state
rather than federal AGI, or (3) provide a 100% deduction or separate
credit for qualifying long-term care insurance premiums. State
deductions generally use federal definitions for determining which
expenses are deductible.

    Table 1 shows how each state treated medical expenses for purposes
of its income tax in the 2007 tax year.

     November 4, 2008                 Page 2 of 4              2008-R-0591
             Table 1: State Income Tax Deductions for Medical Expenses
                                   2007 Tax Year

                          (* = states with long-term care insurance tax credits)
     State                              Medical Expense Deduction
Alabama            Expenses exceeding 4% of AGI (long-term care premiums are fully
Alaska             No state income tax
Arizona            100% of medical expenses
Arkansas           Same as federal
California         Same as federal except medical expenses paid on behalf of a domestic
                   partner are deductible.
Colorado*          Same as federal
Connecticut        None
Delaware           Same as federal
District of        Same as federal
Florida            No state income tax
Georgia            Same as federal
Hawaii             Expenses exceeding 7.5% of Hawaii AGI.
Idaho              Same as federal
Illinois           None
Indiana            None
Iowa               Same as federal except subtract expenses for the purchase of health
                   benefits coverage or insurance if those expenses are exempted in
                   determining Iowa net income.
Kansas             Same as federal
Kentucky           Expenses exceeding 7.5% of Kentucky AGI
Louisiana          None
Maine              Same as federal
Maryland*          Same as federal
Massachusetts      Expenses exceeding 7.5% of Massachusetts AGI
Michigan           None
Minnesota*         Same as federal
Mississippi        Same as federal
Missouri           Same as federal
Montana            Expenses exceeding 7.5% of Montana AGI
Nebraska           Same as federal
Nevada             No state income tax
New Hampshire      Income tax limited to interest and dividends only
New Jersey         Expenses exceeding 2% of New Jersey AGI
New Mexico         100% of medical expenses. Medical expenses for services provided by
                   a medical doctor, osteopath, dentist, podiatrist, chiropractic
                   physician, or psychologist must be provided by a person licensed or
                   certified to practice in New Mexico. Taxpayers or spouses aged 65 or
                   over who pay unreimbursed and uncompensated medical care
                   expenses of $28,000 or more during tax year 2007 may claim an
                   exemption of $3,000.
New York*          Same as federal except subtract amount paid for long-term care
                   insurance premiums from medical expense total.
North Carolina     Same as federal

       November 4, 2008                         Page 3 of 4                        2008-R-0591
                                  Table 1:-Continued-

    State                                Medical Expense Deduction
North Dakota      100% of medical expenses. In addition, the state allows a credit for
                  qualified expenses for caring for a family member who is at least 65
                  years old or disabled and related to the taxpayer by blood or marriage.
                  The family member claiming the credit must have an annual taxable
                  income of no more than $15,000 if single or $30,000 if married,
                  including the income of the member's spouse. A taxpayer whose taxable
                  income is under $25,000 may claim 30% of qualified expenses.
                  Taxpayers who earn more than $25,000 can claim the greater of 20% of
                  the qualified care expenses or 30% of the expenses, less 1% of the
                  expenses for each $2,000 or fraction thereof by which the taxpayer's
                  taxable income exceeds $25,000. The credit is reduced by $1 for each
                  $1 of taxable income that a taxpayer earns over $50,000 and is limited
                  to $2,000 per family member per year or $4,000 for two or more family
                  members. The credit is nonrefundable, may be prorated among several
                  taxpayers, and may not be claimed as a carryback or carryforward.
Ohio              Same as federal except 100% of long-term care insurance premiums
Oklahoma          Same as federal
Oregon*           Same as federal, except taxpayers age 62 or over by the end of the tax
                  year may exclude 100% of medical expenses.
Pennsylvania      None
Rhode Island      Same as federal
South             Same as federal
South             No state income tax
Tennessee         Income tax limited to interest and dividends only
Texas             No state income tax
Utah              Same as federal except 100% of long-term care insurance premiums
Vermont           Same as federal
Virginia          Same as federal
Washington        No state income tax
West Virginia     None
Wisconsin         Same as federal
Wyoming           No state income tax


        November 4, 2008                 Page 4 of 4                   2008-R-0591

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