Did You Know Your Gym Membership Could Be Your Next Tax Break?
PHIT Act
Barely a few months after the elimination of several individual tax deductions, a bill advanced by a committee at the Congress to cut off some fitness costs has been passed by a vote of 28 to 7. The Bill referred to as the Personal Health Investment Today (PHIT) Act was introduced by Rep. Jason Smith, who proposed a somewhat similar bill in 2017. The bill enjoyed bipartisan support and was voted on as one of the series of bills addressing various sectors of the healthcare system.
The provisions of the Bill that passed through the House Ways and Means Committee last week is to the effect that gym membership and some other exercise expenses would be categorized as medical expenses for taxation purposes. In addition to the gym membership, safety equipment used during exercise routines either in a self-directed or formal setting would also come under the medical expenses. The bill explicitly excludes some expenses and activities, such as golf, horseback riding, hunting, sailing and videos or books for activities associated with exercise.
There is, however, a limit of $500 for individuals and $1,000 for couples filing joint tax return and heads of households. It is worthy to note that the tax break for qualified healthcare expenses is one of the few deductions that have continued to exist following the coming into effect of new tax law in 2018. However, it is still uncertain whether it would eventually be passed into law as it still has to go before a full house for consideration. In addition, an identical bill has to pass through the Senate and the House before it can be passed into law. As such, there have been suggestions that if it passes through the house successfully, it may not go easy before the Senate.
Sources claimed that the stock of Planet Fitness rose following the news that the bill successfully scaled the committee stage. The stock which opened at $46.21 per share rose with over 4% to above $47 in the early afternoon trading.
The implication of this bill’s passage for taxpayers who have flexible spending accounts or health savings account i.e. those with contributions deducted before tax would be that the money they contribute could be used for the qualifying exercise costs and they would be able to use those tax-advantaged accounts to make such payments. However, for those who do not have a tax-advantaged account, no guarantee exists that they would be able to take advantage of the tax break.
A Shift In Approach To Healthcare
To calculate your medical costs against your income, there is a need to first list out your deductions. Having done that, the sum of your eligible health care expenses must be above a specific amount of your adjusted gross income for deductions to be possible. This year, the threshold is 7.5% while for 2019, it would be 10%. In a situation where your expenses exceed the threshold, just the amount above it would be deductible.
According to Rep. Jason Smith (R., Mo.) the bill is a shift in the US approach to healthcare with an increased focus on a healthy lifestyle. Reportedly, it would bring about a reduction in Federal revenue by about $3.5 billion over the coming decade. Associations such as The American Heart Association, the Sports and Fitness Association and the Fitbit Inc. have all lobbied in support of the bill.
Public Reactions
Some critics have opined that the bill is a giveaway to individuals of means, considering that the current limitations for deduction of medical expenses reduce the likelihood of the deduction holding any value to a lot of taxpayers. The limits on the deduction on medical expenses have been restricted for a long time and have, therefore, made it unlikely that several taxpayers would enjoy the benefit of the medical expense deduction. However, an expansion of the definition of medical expenses may still increase the number of taxpayers who can enjoy the deduction.
Those who were in support of the version of the bill when it was introduced in 2017 included PHIT America, a corporation that advocates for pro-physical legislation based on common sense. Primary sponsors of PHIT America include Rebook, Adidas, Under Armour and Brooks, Reebok and sports such as Planet Fitness. PHIT actively engaged on the 2017 bill on their website, a YouTube video and a social media hashtag (#passthephitact)
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