Medical Expense Deductions: What Counts and How to Document

Quick overview

Medical expense deductions reduce your taxable income when qualified out-of-pocket medical and dental costs exceed 7.5% of your adjusted gross income (AGI). Because the deduction is available only if you itemize on Schedule A (Form 1040), careful tracking and documentation are crucial to determine whether itemizing beats taking the standard deduction and to substantiate amounts in the event of an IRS inquiry (IRS Publication 502).(https://www.irs.gov/publications/p502)

Which expenses generally qualify?

The IRS allows a broad range of costs that are primarily for the diagnosis, cure, mitigation, treatment or prevention of disease, or for treatments affecting any part or function of the body. Common qualifying expenses include:

• Payments to doctors, dentists, surgeons, chiropractors, psychiatrists and psychologists.
• Prescription medications and insulin (not over-the-counter drugs unless prescribed).
• Laboratory fees, x-rays, and diagnostic tests.
• Necessary medical equipment (e.g., wheelchairs, crutches, oxygen equipment) and prosthetic devices.
• Hearing aids and batteries and costs to repair them.
• Premiums for long-term care insurance (limits apply based on age) and certain long-term care services.
• Payments for inpatient hospital care and nursing services.
• Travel and lodging related to essential medical care (with restrictions and documentation).

For a complete IRS list and guidance, see IRS Publication 502. (https://www.irs.gov/publications/p502)

Examples and practical notes

• Prescription eyeglasses and contact lenses are deductible when prescribed for vision correction.
• Cosmetic surgery is deductible only when necessary to improve a deformity related to a congenital abnormality, injury, or disease—cosmetic procedures for appearance alone are not deductible.
• If an expense is reimbursed by insurance, employer plan, or a settlement, only the unreimbursed portion is deductible.

Common non-qualifying costs

Some frequently mistaken items are not deductible:

• Over-the-counter medicines (unless prescribed).
• General health items such as vitamins and gym memberships (exceptions exist when prescribed for a specific medical condition).
• Funeral expenses and non-medical household help (unless primarily for medical care and properly documented).

How the 7.5% AGI threshold works (with a simple example)

You can deduct only the portion of your total qualified medical expenses that exceeds 7.5% of your AGI. Steps:

1. Calculate your AGI from Form 1040.
2. Multiply AGI by 7.5% (0.075). This is your floor.
3. Add up all qualified, unreimbursed medical expenses for the tax year.
4. Subtract the floor from your total medical expenses — the remainder is the deductible amount (if positive).

Example: AGI = $60,000. Floor = $4,500. Total qualified out-of-pocket medical costs = $8,200. Deductible amount = $8,200 – $4,500 = $3,700.

Remember: you can claim this only if you itemize on Schedule A (Form 1040). See Schedule A instructions for details. (https://www.irs.gov/forms-pubs/about-schedule-a-form-1040)

Documentation: what to keep and how to organize it

Good record-keeping is the single most important step to support medical expense deductions. In my practice, clients who keep a single, dated log and retain originals or scanned copies of key documents rarely have trouble substantiating claims.

Essential documents to retain:

• Itemized bills and receipts from medical providers showing dates, services and amounts paid.
• Explanation of Benefits (EOB) statements from your insurer showing billed amounts, allowed amounts, and payments.
• Pharmacy receipts with prescription names, dates and cost. Keep copies of prescriptions when possible.
• Insurance statements showing reimbursements and policy coverage.
• Canceled checks, credit card statements, or bank records that show payments.
• Mileage logs for travel to medical care (date, origin/destination, purpose, and miles). Do not rely solely on memory — contemporaneous logs are strongest.
• Parking and toll receipts tied to medical appointments.
• Letters or notes from medical professionals when the expense is unusual (for example, a prescribed lift or home modification).

Organization tips:

• Use a dedicated folder or digital folder per tax year.
• Maintain a spreadsheet summarizing dates, payees, type of expense, amount paid, and whether it was reimbursed.
• Save EOBs and receipts together to reconcile insurance reimbursements against provider bills.

Retention periods:

• Keep records at least three years from the date you filed the return (the standard IRS audit window), but consider retaining medical records and receipts for up to seven years if you claim large or unusual deductions or if a state law requires longer retention.

Sources: IRS Publication 502; IRS recordkeeping guidance. (https://www.irs.gov/publications/p502)

Special situations and interactions with other tax rules

• Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs): If you pay for medical care with HSA or FSA dollars, those expenses are not deductible because they were already paid with pre-tax dollars. You cannot “double dip.” See IRS rules on HSAs. (https://www.irs.gov/publications/p969)

• Insurance Premiums: Premiums for medical and dental insurance are deductible as medical expenses if you itemize, and to the extent they are not paid with pre-tax dollars. Employer-sponsored pre-tax premium payments are excluded from deductible medical expenses.

• Long-term care premiums: Limited deductions may apply based on your age and IRS limits; check Publication 502 and Publication 583 for rules.

• Dependent expenses: You can deduct medical expenses paid for a spouse or dependent as long as they meet the IRS tests for dependency.

• Reimbursements, refunds or settlements: If you receive a reimbursement in the same tax year you claimed the expense, you must reduce the deduction. If reimbursement arrives in a later year and you claimed the deduction previously, you may need to report the reimbursement as income or amend the earlier return in certain situations — consult a tax professional.

Mileage, travel and lodging rules

You may deduct transportation costs to and from medical treatment. Acceptable costs include:

• Mileage (use the IRS medical mileage rate published annually) or actual costs of transportation (taxi, bus, train, ambulance).
• Parking fees and tolls.
• Lodging while away from home for medical care (limited to essential care, not for comfort; receipts and a doctor’s note may help).

Keep contemporaneous records: date, purpose, starting point and destination, miles driven, and receipts for parking/lodging. Check the current IRS medical mileage rate before calculating the deduction.

Audit risk and red flags

Large, unusual, or round-number medical expense deductions may draw IRS attention. Minimizing audit risk:

• Keep clear documentation and a running summary spreadsheet.
• Match provider statements to payments and EOBs.
• Avoid inflating mileage — use a reasonable, contemporaneous log.
• Be prepared to produce canceled checks or bank/credit card statements showing payment.

If audited, having a well-organized file with copies of bills, EOBs, and proof of payment will often result in a straightforward resolution.

Practical strategies I use with clients

1. Bunching: If you are close to the 7.5% floor, consider timing elective medical procedures so multiple large expenses fall into a single tax year to exceed the threshold and make itemizing worthwhile. See our guide on How to Bunch Medical Expenses to Itemize.

2. Year-round tracking: Maintain a digital folder and monthly reconciliation to prevent missing small but deductible items.

3. Professional review: Before filing, have a CPA or tax professional review large medical deductions to confirm documentation and proper reporting on Schedule A.

4. Use technology: Many clients photo-scan receipts into a cloud folder and update a shared spreadsheet with totals and brief descriptions.

Relevant FinHelp resources:

• Which medical expenses are tax-deductible? — https://finhelp.io/glossary/which-medical-expenses-are-tax%e2%80%91deductible/
• How to track medical expenses to maximize deductions — https://finhelp.io/glossary/how-to-track-medical-expenses-to-maximize-deductions/
• How to document medical expenses for tax purposes — https://finhelp.io/glossary/how-to-document-medical-expenses-for-tax-purposes/

Frequently asked questions (brief)

Q: Can I deduct dental work and braces?
A: Yes—necessary dental procedures and orthodontia are generally deductible when not cosmetic and unreimbursed.

Q: What if I don’t itemize?
A: You cannot claim medical expense deductions if you take the standard deduction. Compare itemized totals (including medical expenses) to the standard deduction before deciding.

Q: Do I have to include dependents’ expenses?
A: You may include expenses for a spouse or qualifying dependent that you paid during the tax year.

Final checklist before you file

• Confirm you are itemizing (Schedule A) and that medical expenses exceed 7.5% of AGI.
• Reconcile provider bills with EOBs and proof of payment.
• Assemble mileage logs, prescriptions, and statements.
• Scan or copy all documents into a dated digital folder.
• Consult your CPA if you have unusually large amounts or complex reimbursements.

Professional disclaimer

This article is educational and general in nature and does not constitute personalized tax advice. Tax laws and IRS guidance can change; consult IRS Publication 502, the Schedule A instructions, or a qualified tax professional for advice tailored to your situation. (https://www.irs.gov/publications/p502)

References and authoritative sources

• IRS Publication 502, Medical and Dental Expenses: https://www.irs.gov/publications/p502
• IRS Topic No. 502: Medical and Dental Expenses: https://www.irs.gov/taxtopics/tc502
• Schedule A (Form 1040) information: https://www.irs.gov/forms-pubs/about-schedule-a-form-1040