Why documentation matters

Careful recordkeeping is the difference between leaving money on the table and capturing a legitimate tax deduction. The IRS allows taxpayers who itemize to deduct qualified medical expenses only to the extent they exceed 7.5% of adjusted gross income (AGI) in the tax year (see IRS Publication 502). If you can prove the date, amount, provider, and medical necessity of the expense, you significantly reduce the chance of an audit adjustment, and you increase the odds that smaller or one-off costs will combine to produce a meaningful deduction.

Sources: IRS medical expense deduction overview and Publication 502 (see https://www.irs.gov/credits-deductions/individuals/medical-expense-deduction and https://www.irs.gov/pub/irs-pdf/p502.pdf).

What documents should you keep? (Checklist)

Keep originals (or high-quality scans) for each expense and store them by tax year. The core items that support a medical deduction are:

  • Receipts and itemized bills from hospitals, clinics, pharmacies, dentists, and therapists. The document should show date of service, provider name, service details, and amount paid.
  • Explanation of Benefits (EOB) from your insurer showing billed charges, what insurance paid, and what you owe.
  • Proof of payment: canceled checks, credit-card statements, bank statements, or electronic payment confirmations that match the billed amount.
  • Prescriptions, prescription labels, and pharmacist invoices for medications.
  • Invoices and documentation for durable medical equipment (DME) showing medical necessity or prescription when relevant.
  • Travel logs for medical trips: date, origin & destination, purpose (doctor/specialist), miles driven or transportation costs. Record odometer readings and purpose contemporaneously.
  • Receipts for lodging and meals if they qualify under IRS rules (see Pub 502 for limits and conditions).
  • Letters, notes, or treatment plans from physicians when the expense is not obviously medical (for example, some home modifications or dietary costs related to a disease).
  • Records of reimbursements from insurance or other sources—only unreimbursed expenses are deductible.

Tip from my practice: scan or photograph receipts immediately and keep both a cloud backup and a local copy. In one case, a client avoided losing a $3,000 deduction after a provider misplaced their invoice because they had a dated scanned copy.

How to organize your records (practical system)

A simple, consistent structure saves hours at tax time. Use a folder-per-year approach, plus a short spreadsheet summary:

Suggested folder structure

  • 2024/Medical Receipts/Hospital
  • 2024/Medical Receipts/Pharmacy
  • 2024/Medical Receipts/Transport
  • 2024/EOBs & Insurance

Suggested spreadsheet columns (one row per expense)

  • Date | Provider | Type (RX, Visit, DME, Travel) | Gross amount | Insurance paid | Out-of-pocket paid | Reimbursed? (Y/N) | File path/scan name

Maintaining a tidy spreadsheet makes it trivial to total your unreimbursed expenses by category and prepare Schedule A when you itemize.

Which expenses qualify — and which don’t

IRS Publication 502 lists qualifying costs. Common deductible items include:

  • Payments for medical services (doctor, surgeon, specialists)
  • Prescription medications and insulin
  • Hospital and long-term care facility fees
  • Dental and vision care
  • Durable medical equipment (wheelchairs, crutches)
  • Transportation and lodging for medical care (subject to limits and tests)

Non-deductible examples include most cosmetic procedures, general health items not medically necessary, and expenses paid with tax-advantaged funds.

Important: amounts paid with tax-advantaged accounts such as Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs) are not deductible again on Schedule A. You cannot “double dip.” For more on what counts and how to claim, see our guide on Deductible Medical Expenses: What Counts and How to Claim.

How to calculate the deductible amount (worked example)

  1. Total your unreimbursed qualified medical expenses for the tax year.
  2. Determine 7.5% of your AGI for the year — only expenses above that threshold are deductible.

Example:

  • AGI: $60,000 → 7.5% threshold = $4,500
  • Total unreimbursed medical expenses: $7,200
  • Deductible amount = $7,200 − $4,500 = $2,700 (enter on Schedule A)

This calculation explains why bundling or timing expenses can matter: shifting costs between years can make the difference between an itemized deduction and none at all. For guidance on timing, see our article When to Bundle Medical Expenses to Maximize Deductions.

Common recordkeeping mistakes and how to avoid them

  • Throwing away EOBs: An EOB contains the insurer’s determination of what was paid and what remains—keep it.
  • Relying on memory: contemporaneous records (dated receipts, mileage logs) hold far more weight than recollection.
  • Not documenting reimbursements: if you’re reimbursed, keep the proof and subtract it from your total expenses.
  • Mixing reimbursed and unreimbursed expenses: track reimbursed items separately in your spreadsheet.

In my experience advising clients, the single most frequent error is failing to document travel related to medical care. A simple mileage log with dates and destinations often converts otherwise overlooked travel costs into deductible expenses.

Special situations to watch

  • Self-employed health insurance premiums: generally deductible on Schedule 1 as an adjustment to income (not on Schedule A as an itemized medical expense). See the IRS self-employed health insurance page for details: https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-health-insurance-deduction.

  • HSAs and FSAs: if an expense was reimbursed from these accounts, it’s not deductible. Keep statements showing distributions and claims.

  • Capital medical expenses: if you buy or improve equipment for medical reasons (e.g., stairlift), you may be able to deduct the portion that exceeds any increase in property value; keep vendor invoices and physician recommendations.

  • Long-term care and impairment-related home modifications: documentation from a qualified practitioner is helpful to show medical necessity.

How long to keep records

For tax records generally, a minimum retention period is three years after you file the return (the IRS’s typical statute of limitations). However, if you:

  • Omit significant income or file a fraudulent return, or
  • Need proof of medical necessity for larger items,

you may want to keep records for up to seven years or indefinitely for major medical events. When in doubt, keep the documentation for at least three years after the tax return due date or three years after you paid the tax, whichever is later.

Audit preparedness checklist

If the IRS asks for proof, provide organized documentation that ties directly to the numbers on your tax return:

  • A summary spreadsheet that totals unreimbursed medical expenses and maps each entry to a supporting document.
  • Copies/scans of receipts and EOBs that match the totals.
  • Proof of payment (bank/credit card statements or canceled checks).
  • A written note or physician letter for expenses where medical necessity is not obvious.

Practical tips and best practices

  • Scan receipts the day you receive them and name files consistently (YYYY-MM-DDprovideramount).
  • Keep a contemporaneous mileage log for medical trips; include purpose and odometer start/stop.
  • If you expect irregular high medical costs, talk to your tax preparer mid-year to plan for bundling or timing deductible expenses.
  • Review yearly changes to IRS Publication 502 and the medical mileage rate for the tax year before preparing your return.

Final thoughts and professional note

Documenting medical expenses carefully can transform eligible health costs into meaningful tax savings — but it requires diligence. In my practice I’ve seen clients recover thousands in taxes simply by assembling receipts, EOBs, and a clear spreadsheet. Follow IRS Publication 502, exclude expenses already reimbursed or paid with tax-favored accounts, and keep records organized and accessible.

This article is educational and not individualized tax advice. For decisions that affect your tax return, consult a CPA or tax professional who can review your records and circumstances. See IRS guidance at the links above for official positions and definitions.

Authoritative sources:

Related FinHelp articles: