Personal income tax: deduction: medical expenses., the official text

An act to amend Section 17072 of, and to add and repeal Section 17242 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL'S DIGEST

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, 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 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.
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.

The people of the State of California do enact as follows:

SECTION 1.
Section 17072 of the Revenue and Taxation Code is amended to read:
17072.
(a) Section 62 of the Internal Revenue Code, relating to adjusted gross income defined, shall apply, except as otherwise provided.
(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to certain expenses of elementary and secondary school teachers, shall not apply.
(c) Section 62(a)(21) of the Internal Revenue Code, relating to attorneys fees relating to awards to whistleblowers, shall not apply.
(d) For taxable years beginning on or after January 1, 2026, Section 62(a) of the Internal Revenue Code, relating to the general rule, is modified to provide that the deduction under Section 17242 shall be allowed in determining adjusted gross income.

SEC. 2.
Section 17242 is added to the Revenue and Taxation Code, to read:
17242.
(a) (1) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, there shall be allowed a deduction in determining the adjusted gross income of a qualified taxpayer an amount equal to the costs of medical care not compensated for by insurance or otherwise to the extent that such costs exceed 4 percent of the qualified taxpayer’s federal adjusted gross income.
(2) The deduction allowed by paragraph (1) shall not exceed five thousand dollars ($5,000).
(b) For purposes of this section, the following definitions apply:
(1) “Medical care” has the same meaning as that term is defined in Section 213(d) of the Internal Revenue Code.
(2) “Qualified taxpayer” means an individual that satisfies both of the following:
(A) Has adjusted gross income that does not exceed 300 percent of the federal poverty level, as determined by the United States Census Bureau.
(B) Does not take an itemized deduction for costs of medical care pursuant to Section 213 of the Internal Revenue Code, relating to medical, dental, etc., expenses, on their California income tax return.
(c) This section shall remain operative only until December 1, 2031, and as of that date is repealed.

SEC. 3.
(a) For purposes of complying with Section 41 of the Revenue and Taxation Code, as it relates to the deduction allowed by Section 17242 of the Revenue and Taxation Code, as added by this act, the Legislature finds and declares the following:
(1) The goals of the deduction allowed are the following:
(A) To help Californians pay for their health care premiums, as premiums have increased 55 percent since 2010, which is at least twice as fast as wages or inflation over the same time period.
(B) To allow Californians to deduct more of their health care expenses and pay less in state tax.
(2) The performance indicators for the Legislature to use when measuring whether the tax exemption meets the goals specified in paragraph (1) will be the following:
(A) The change in number of taxpayers receiving the deduction under Section 17242 of the Revenue and Taxation Code for taxable years after enactment of the amendments made by this bill, compared to the number of taxpayers receiving the deduction under Section 213 of the Internal Revenue Code on their California income taxes for taxable years prior to the enactment of this act.
(B) The total dollar value of deductions taken pursuant to Section 17242 of the Revenue and Taxation Code.
(b) (1) On or before February 1, 2030, the Franchise Tax Board shall provide an anonymized report, in compliance with Section 9795 of the Government Code, to the Assembly Committee on Revenue and Taxation and the Senate Committee on Revenue and Taxation with the number of taxpayers that claimed the deduction, and the total amount, in dollars, of deductions claimed by year for each taxable year beginning on or after January 1, 2026.
(2) The disclosure provisions of this paragraph shall be treated as an exception to Section 19542.

SEC. 4.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.