Personal income tax: credit: durable medical equipment.

Senator Caballero advances a temporary personal income tax credit designed to offset unreimbursed durable medical equipment costs for a qualifying dependent with complex medical conditions, quantified as 50% of qualified expenditures with a $5,000 per-year cap per dependent. The credit would apply to taxable years 2026 through 2030 and take immediate effect as a tax levy, with sunset provisions slated for December 1, 2031. Qualifying dependents are under 18 and have one or more complex medical conditions, and the durable medical equipment must be prescribed by a licensed health care provider.

Qualified expenditures are unreimbursed costs paid or incurred for the purchase of durable medical equipment, with “durable medical equipment” defined by federal standards and “complex medical conditions” including conditions that would make a child eligible for EPSDT services. The credit is in lieu of other credits for the same expenditures, and the deduction otherwise allowed for those expenditures is reduced by twice the credit amount. If the credit exceeds the taxpayer’s net tax for a year, the excess may be carried forward for up to seven succeeding years.

Implementation and oversight are centralized in a reporting framework: the Franchise Tax Board must provide annual disclosures to the Legislature beginning no later than July 1, 2028, detailing the number of taxpayers receiving the credit and the total credits allowed, with certain public-record restrictions applying to the disclosures. The measure adds explicit definitions and cross-references to existing law, and it requires administration within the state tax system without separate appropriations being specified.

The bill’s findings describe the financial burden on families with medically complex children and note insurance gaps that can lead to upfront costs or delayed care, framing the credit as a mechanism to address out-of-pocket DME expenses. The policy context emphasizes home-based care and deinstitutionalization objectives, placing the credit within a broader aim of supporting families in managing durable medical equipment needs. Because the credit is time-limited and paired with a defined sunset, its fiscal and administrative footprint is constrained to the five-year eligibility window, with carryover potential extending beyond that period under the bill’s terms. Regulators would likely need guidelines on documentation and claim processes to operationalize eligibility and verify qualifying expenditures.