Overview
Medical expense deductions reduce taxable income by allowing you to subtract eligible out-of-pocket medical costs that exceed a statutory threshold of your adjusted gross income (AGI). The deduction is available only if you itemize deductions on Schedule A (Form 1040) rather than claiming the standard deduction (see our explainer on What Are Itemized Deductions?).
In practice, relatively few taxpayers claim these deductions because the costs must be large enough relative to income to clear the 7.5% AGI floor (current as of 2025). Still, for people with major medical events, chronic conditions, or sizable unreimbursed bills, this deduction can materially reduce tax liability. In my work advising clients, I routinely find that careful recordkeeping and correct coordination with insurance and tax-advantaged accounts is what unlocks the deduction.
How the deduction works (step-by-step)
- Determine eligibility to itemize: If your total itemized deductions (including state and local taxes, mortgage interest, charitable gifts, etc.) exceed the standard deduction, you can choose to itemize. See our guide on What Are Itemized Deductions? for details.
- Add up qualifying medical expenses for the tax year. Only unreimbursed amounts count.
- Compute the 7.5% AGI floor: multiply your AGI by 0.075. Subtract this floor from your total qualifying medical expenses. Only the remainder is deductible.
- Enter the allowable amount on Schedule A (Form 1040).
Example: If your AGI is $60,000, the 7.5% floor is $4,500. If you have $8,000 in qualifying, unreimbursed medical expenses, you can deduct $8,000 – $4,500 = $3,500 on Schedule A.
(authoritative reference: IRS Publication 502, Medical and Dental Expenses, IRS.gov)
What counts as a qualifying medical expense
The IRS defines a broad set of expenses that generally qualify if they are primarily to alleviate or prevent a physical or mental defect or illness. Common qualifying expenses include:
- Payments to doctors, surgeons, dentists, and specialists.
- Hospital care, surgeries, and inpatient treatment costs.
- Prescription medications and insulin (over-the-counter medicines are deductible only with a prescription).
- Medical equipment and supplies such as wheelchairs, crutches, prosthetic devices, and hearing aids.
- Long-term care costs when medically necessary (specific rules apply).
- Premiums for medical and dental insurance in many cases, including Medicare premiums (see IRS Pub 502).
- Transportation costs for medical care: mileage or actual costs for travel to and from medical treatment when necessary.
Practical note from my practice: include out-of-pocket co-pays, diagnostic tests, and medically necessary home modifications (like ramps) when supported by a doctor’s recommendation.
For a compact checklist and examples on documenting expenses, see our guide on How to Document Medical Expenses for Tax Purposes.
What does NOT qualify
Not every health-related payment counts. Typical nonqualifying items are:
- General health items for everyday wellness (vitamins, gym memberships for weight loss unless prescribed for a disease).
- Cosmetic procedures (unless needed to correct a deformity or injury).
- Funeral or burial costs.
- Expenses paid with tax-free HSA or FSA distributions (you can’t deduct amounts already paid with tax-preferred dollars).
Be sure to confirm borderline items with IRS Publication 502 or a tax professional before claiming them.
Interaction with HSAs, FSAs, and insurance
- If you use a Health Savings Account (HSA) or Flexible Spending Account (FSA) to pay medical costs, those expenses are not deductible because they were paid with tax-advantaged dollars. See our article Using HSAs for Big Medical Expenses: A Practical Guide for ways to coordinate HSA distributions and tax planning.
- Reimbursements from insurance reduce the amount you may deduct. Only unreimbursed expenses are allowed.
- If your employer paid a portion of health insurance premiums, subtract any portion that was paid pre-tax.
In my experience, clients sometimes try to double-dip by claiming expenses paid from an HSA; this is an IRS red flag. Maintain a clear ledger of payments, reimbursements, and account distributions to avoid errors.
Common documentation and recordkeeping best practices
To support a medical expense deduction you will need:
- Receipts and invoices showing the date, provider, service, and amount paid.
- Insurance Explanation of Benefits (EOBs) showing what was paid by the insurer and what you owed.
- Bank or credit card statements as secondary proof when receipts are missing.
- A physician’s statement when an expense might otherwise be considered cosmetic or a home modification is claimed for medical reasons.
Keep records for at least three years from the date you file the return (longer if you claim a loss carryback or there are special circumstances). For more on organization and documentation techniques, review our How to Document Medical Expenses for Tax Purposes page.
Strategic approaches that often help
- Bunching: If your medical bills are close to the threshold in multiple years, consider timing elective but necessary procedures into a single tax year to surpass the 7.5% AGI floor. This is similar to other bunching strategies used to maximize itemized deductions and is discussed in our article Bunching Strategies for Itemized Deductions.
- Coordinate with HSAs: If you have an HSA, consider whether to pay out-of-pocket and save HSA receipts to reimburse yourself in a future year, which preserves the tax benefit and keeps deduction options flexible.
- Reconcile reimbursements promptly: Don’t forget to subtract insurance or settlement reimbursements from your totals for tax reporting.
Mistakes I see often
- Failing to subtract reimbursements from totals.
- Trying to deduct expenses paid with tax-free HSA/FSA dollars.
- Poor organization: missing receipts, vague descriptions, or lack of EOBs.
- Forgetting the AGI floor calculation and claiming amounts that exceed the allowable limit.
When it makes sense to consult a tax professional
If medical expenses are large relative to income, if you received settlements (like personal injury awards) that affect reimbursements, or if you’re unsure whether a specific cost qualifies (home improvements, long-term care contracts), consult a licensed tax professional. Complex situations—estate issues, self-employed medical deductions, or coordination with Medicaid/Medicare—are situations where professional advice prevents costly mistakes.
Frequently asked questions
Q: Is the 7.5% AGI threshold permanent?
A: The 7.5% floor is currently in effect as of 2025 (IRS Publication 502). Tax law can change; verify annually.
Q: Can I deduct travel to a specialist?
A: Yes, ordinary and necessary travel to receive medical care may be deductible. You can use the IRS standard medical mileage rate or actual costs — keep mile logs or receipts.
Q: Do Medicare premiums count?
A: Many Medicare-related premiums (Part B, Part D, Medicare Advantage) are eligible for deduction if unreimbursed; include them when calculating qualifying expenses (see IRS Pub 502).
Professional disclaimer and sources
This content is educational and not individualized tax advice. For personalized guidance, consult a licensed tax professional.
Authoritative sources cited in this article:
- IRS Publication 502, Medical and Dental Expenses (IRS.gov) — primary authority on qualifying medical costs.
Related FinHelp articles (internal links):
- What Are Itemized Deductions? — https://finhelp.io/glossary/what-are-itemized-deductions/
- Using HSAs for Big Medical Expenses: A Practical Guide — https://finhelp.io/glossary/using-hsas-for-big-medical-expenses-a-practical-guide/
- How to Document Medical Expenses for Tax Purposes — https://finhelp.io/glossary/how-to-document-medical-expenses-for-tax-purposes/
If you’d like, I can prepare a one-page checklist you can use to collect and organize receipts for a medical deduction claim.
