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Level 2

NJ medical deduction calculation

Regardless of how high of the amount I enter into the NJ Medical expense, the NJ State Tax due amount doesn't change more than a few dollars. I even put an over the top amount $10,000 just to test, and the change was few dollars. Anyone run into this issue? I am in the 6.37% NJ State tax bracket and once I clear the 2% medical expense threshold, I would think my tax due would be lowered by 6.37% of on the dollar. But it is not calculating this way.
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Expert Alumni

NJ medical deduction calculation

Thank you for the additional information. I was able to recreate this.

Here's what happens.

When you have more in medical expenses you have less in NJ taxable income.

This lowers the credit for the tax you paid to NY.

When you have less in medical expenses you have more in NJ taxable income.

This increases the credit for the tax you paid to NY.

The very slight movement that you see is the difference in tax rates.

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Expert Alumni

NJ medical deduction calculation

I tested this and the NJ medical deduction calculated properly for me.

It was tested a few different ways

  • First by entering the medical expenses in the Federal interview
  • I then went into the NJ interview and added the insurance premiums that are taken out pre-tax for Federal but after-tax for NJ
  • Then I went and removed the expenses from the Federal interview and came back and added them back on NJ.
  • At all times the expenses/ tax results were correct.

I would remove all medical expenses and then add them back in.

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Level 2

NJ medical deduction calculation

Thank you for your recommendation. I tried what was suggested and I am still not seeing it calculating the right way. Can it do something with living in state of NJ but all income coming from working in NY State? The amount also does not meet the Federal Medical deduction of 7.5% threshold but does exceed 2% NJ threshold. 

Highlighted
Expert Alumni

NJ medical deduction calculation

Thank you for the additional information. I was able to recreate this.

Here's what happens.

When you have more in medical expenses you have less in NJ taxable income.

This lowers the credit for the tax you paid to NY.

When you have less in medical expenses you have more in NJ taxable income.

This increases the credit for the tax you paid to NY.

The very slight movement that you see is the difference in tax rates.

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

Highlighted
Level 2

NJ medical deduction calculation

Thank you. Just to confirm then, the calculations across the 2 states are correct then? Rate difference in my tax bracket between NY and NJ is 6.57%-6.37%=.2% 

 

For every $1000 over the 2% threshold equates to $2. I verified with $1000 increments to confirm.

 

 

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Expert Alumni

NJ medical deduction calculation

That would be correct. I hope this explained it.

 

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