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Bill Summary · HB 1074

Summary of HB 1074 (Session 2025, North Carolina)

Title

Prescription Drug Expenses Tax Deduction

Purpose and Intent

HB 1074 would authorize an income tax deduction for certain prescription drug expenditures. The bill aims to provide taxpayers with a fiscal benefit by reducing taxable income based on unreimbursed out-of-pocket costs for prescribed medications and related pharmacy expenses.

Key Provisions

  • Deduction Amount and Scope

    • Allows a deduction of up to $5,000 from a taxpayer’s adjusted gross income (AGI) for unreimbursed out-of-pocket expenditures on prescribed medications and pharmacy cost-sharing.
    • The deduction applies only to amounts that are not covered by tax-favored accounts such as a Flexible Spending Account (FSA) or Health Savings Account (HSA).

  • Coordination with Other Deductions

    • If a taxpayer claims a deduction under this bill for prescribed medications or pharmacy cost-sharing in a given tax year, they cannot also claim a deduction for the same expenses under another provision of the “Other Deductions” section (specifically, sub-subdivision (a)(2)c. of § 105-153.5) for that same tax year.

  • Taxable Year Timing

    • The deduction would apply to taxable years beginning on or after January 1, 2026.

Affected Parties and Impacts

  • Taxpayers with High Pharmacy Costs

    • Individuals with significant out-of-pocket costs for prescription drugs could reduce their North Carolina taxable income by up to $5,000, potentially lowering their state income tax liability.

  • Tax-Favored Account Users

    • Taxpayers who rely on FSAs or HSAs for medication expenses would not benefit from the deduction for amounts already covered or reimbursed by those accounts.

  • State Revenue Implications

    • The deduction reduces taxable income subject to North Carolina’s individual income tax, which could decrease state tax revenue to the extent the deduction is claimed.

Procedural and Timeline Details

  • Effective Date: Taxable years beginning on or after January 1, 2026.
  • Legislative Status: Filed April 28, 2026. Primary sponsor: Representative Reeder. Co-sponsors include Donna White, Grant Campbell, Erin Paré, Tim Reeder, and Allen Chesser.

Practical Considerations

  • Taxpayers should track unreimbursed prescription drug expenses and ensure they do not double-dip with other deductions for the same expenses.
  • This deduction is non-refundable and reduces AGI used for calculating North Carolina state income tax.

If you’d like, I can provide a comparison to how similar deductions work in other states or draft a brief pros/cons analysis from a fiscal impact perspective.

Compiled from official sources — confirm details with the bill’s official record.

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