Introduction
Documenting medical expenses correctly is the difference between a clean deduction and a rejected claim during an audit. If you plan to itemize on Schedule A, you can deduct qualifying unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). That deduction hinges not only on what you paid, but on the records you keep. This guide explains exactly what to save, how to organize it, and how to present your records if the IRS asks for proof.
Why documentation matters
Good records do three things:
- Prove the expense was incurred (date and provider).
- Show the expense was eligible and not reimbursed by insurance or another party.
- Help you calculate the deductible amount accurately when you itemize.
In my 15+ years advising clients, those who log expenses throughout the year avoid last-minute scrambling and often capture more deductible items than those who try to recreate records months later.
Quick legal context
The IRS defines qualifying medical and dental expenses in Publication 502 (IRS Pub 502). You can only deduct qualifying expenses to the extent they exceed 7.5% of your AGI and only if you itemize on Schedule A. Always refer to the current Pub 502 for the tax year you are filing (IRS Publication 502).
Step-by-step documentation process
1) Collect source documents as you pay
- Receipts and invoices from doctors, clinics, dentists, hospitals, pharmacies, and other medical providers. These should state the provider name, service provided, date, and amount.
- Explanation of Benefits (EOB) from your insurer. EOBs show billed amounts, allowed amounts, and what insurance paid — essential for proving what you actually paid out-of-pocket.
- Pharmacy printouts or receipts showing prescription name, date, and cost. (Nonprescription medicine is generally not deductible unless prescribed.)
- Canceled checks, bank statements, or credit-card statements for payments, when receipts are missing.
2) Track details in a single system
Create a spreadsheet or use financial software to log every medical expense as it occurs. Suggested columns:
- Date of service
- Provider name
- Patient (self, spouse, dependent)
- Description (e.g., MRI, copay, prescription)
- Billed amount
- Insurance payment
- Out-of-pocket paid
- Method of payment (credit card, check, HSA)
- Supporting document filename or location
Keeping this in one file makes it easy to total medical expenses and isolate the non-reimbursed portion you’ll report on Schedule A.
3) Separate reimbursed and non-reimbursed items
Only the portion you paid after insurance or other reimbursements is deductible. For each expense, subtract what insurance paid (or what an HSA/FSA covered) so your spreadsheet shows the net out-of-pocket cost.
4) Preserve proof of payment
The IRS is most satisfied with proofs that show both the expense and the payment: receipts stamped PAID, canceled checks, or credit card statements paired with the provider invoice. If you paid with an HSA or FSA debit card, include those statements and Form 8889 if you used an HSA (HSA guidance: IRS Form 8889).
5) Keep mileage and travel logs for medical travel
If you travel for medical care, note date, mileage, round-trip miles, purpose, and destination. Use the IRS medical mileage rate for the tax year when you calculate the deduction; retain odometer readings, calendar notes, or other contemporaneous logs.
6) Record payments for others you can claim
You may deduct medical expenses you paid for a spouse or dependent. Record their name and relationship and be sure they meet IRS dependency rules.
What counts as qualifying documentation
Acceptable documentation includes:
- Provider invoices showing service and date.
- Receipts marked PAID.
- Explanation of Benefits (EOB) from insurers.
- Bank or credit-card statements when paired with provider documentation.
- Canceled checks, ACH confirmations, and digital payment receipts.
- Prescription pharmacy printouts showing date and Rx name.
If you lack a receipt, the IRS will accept other contemporaneous proof, but it’s better to explain missing documentation in writing and have corroborating evidence like EOBs or bank records (IRS Pub 502).
Practical examples
Example 1 — Surgery with insurance: You receive a hospital bill for $20,000; the insurer allows $8,000 and pays $6,500. Your EOB shows you’re responsible for $1,500 and you pay that by check. Document: the hospital invoice, EOB, canceled check, and a line in your expense spreadsheet.
Example 2 — Prescription and mileage: You pay $200 for a prescribed medication and drive 40 miles round trip to get treatment. Keep the pharmacy receipt, log the mileage in your travel sheet, and keep a dated note explaining the trip.
Special cases and common pitfalls
- Reimbursed expenses: If you were later reimbursed (for example, you received a settlement), you generally must reduce your claimed medical expenses by that reimbursement.
- Employer-provided coverage: Premiums paid with pre-tax payroll contributions generally aren’t deductible because they were not paid with after-tax dollars.
- HSAs and FSAs: Amounts paid with HSA or FSA funds are not deductible again on Schedule A. Keep HSA/FSA statements to show funds were used.
- Cosmetic procedures: Cosmetic surgery for purely cosmetic reasons is not deductible. If the surgery is necessary to correct a deformity or treat an illness, document the medical necessity with provider notes.
How long to keep records
IRS recordkeeping guidance generally recommends keeping tax records at least three years from the date you file. If you underreported income by more than 25% or you’re claiming a loss from worthless securities or bad debt, keep records for seven years. For medical expenses, keep supporting documents for at least three years after filing; retain longer if you claimed large, unusual, or audit-prone items (IRS Recordkeeping).
Preparing for an audit
If the IRS requests substantiation, deliver a clear, organized packet: a summary worksheet (your spreadsheet), copies of invoices/receipts, EOBs, copies of cancelled checks or card statements, and a brief explanatory letter tying each expense to the itemized deduction. Label documents and paginate the packet. In audits, clarity and organization reduce friction and speed resolution.
Digital options that work
- Scanning apps: Use a scanning app that saves PDFs and filenames them with date and provider. Back up to cloud storage that supports versioning.
- Expense tracking tools: Many personal finance platforms let you tag transactions as medical and attach receipts. Choose one that exports usable reports for tax prep.
Interacting with tax professionals
Bring your organized spreadsheet and digital copies to your tax preparer. Preparing one clear summary saves time and reduces fees. If you have complex situations (e.g., travel for medical care, long-term care payments, or large medical expenses across multiple years), a CPA or tax attorney can help structure documentation to withstand scrutiny.
Links and further reading
- IRS Publication 502: Medical and Dental Expenses — https://www.irs.gov/forms-pubs/about-publication-502 (authoritative list of deductible items)
- See related FinHelp guides on when expenses become deductible and how to bunch medical costs: “When Medical Expenses Become Tax-Deductible: A Threshold Guide” and “How to Bunch Medical Expenses to Itemize” for strategies to maximize deductions (FinHelp internal resources).
Useful internal resources:
- When Medical Expenses Become Tax-Deductible: A Threshold Guide — https://finhelp.io/glossary/when-medical-expenses-become-tax-deductible-a-threshold-guide/
- How to Bunch Medical Expenses to Itemize — https://finhelp.io/glossary/how-to-bunch-medical-expenses-to-itemize/
Bottom line
Consistent, contemporaneous documentation — receipts, EOBs, proof of payment, and a clear spreadsheet — is the most reliable path to claiming medical expense deductions on your tax return. Start tracking early, pair receipts with proof of payment, and retain records for the recommended period. When in doubt, consult a tax professional to confirm eligibility and documentation for your specific situation.
Professional disclaimer
This article is educational and does not substitute for personalized tax advice. For specific questions about your situation, contact a licensed CPA or tax attorney. Refer to current IRS guidance for the tax year you are filing (IRS Publication 502).
