Why careful tracking matters
If you itemize deductions on Schedule A, only medical expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible (IRS Publication 502). That threshold means accurate recordkeeping turns many scattered charges—copays, prescriptions, device purchases, travel to appointments—into a single, reportable tax benefit.
In my practice as a CPA and financial planner, I’ve seen clients overlook small recurring costs that collectively move them above the 7.5% line. One client’s monthly therapy copays and prescription costs added up to a sizable deduction after we captured transportation and durable medical equipment expenses they’d been ignoring.
Sources to keep on hand:
- IRS Publication 502, Medical and Dental Expenses (see: https://www.irs.gov/publications/p502)
- IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, for HSA rules (https://www.irs.gov/publications/p969)
- Consumer Financial Protection Bureau guidance on healthcare costs (https://www.consumerfinance.gov)
What counts as a qualifying medical expense?
Qualifying expenses generally include payments for: doctor and dentist visits, hospital services, prescription medications, medical equipment (crutches, prosthetics), and certain long-term care costs. Some insurance premiums are deductible, depending on employment status (for example, self-employed individuals may be able to deduct health insurance premiums above the line; see IRS guidance for details).
Less obvious items that can qualify (with documentation):
- Mileage or actual transportation costs to get medical care (follow the IRS standard medical mileage rate when applicable).
- Home improvements required for medical reasons when they don’t increase the home’s value (or only the medical portion may be deductible).
- Travel and lodging costs for qualified medical care in some situations (see When Medical Travel Costs May Be Tax-Deductible).
Note: Expenses paid with pre-tax dollars (FSA, HSA, or employer plan reimbursements) are not deductible again on Schedule A. If you used HSA funds, those amounts are reported on Form 8889 and generally cannot be added to Schedule A (IRS Publication 969).
How to build a practical tracking system
- Start with categories
- Create standard categories: Office visits, hospital/ER, prescriptions, medical devices, insurance premiums, mileage/transportation, lodging & travel, unreimbursed therapies.
- Categorize items immediately when you pay them—don’t rely on memory at year-end.
- Choose tools that fit your workflow
- Simple spreadsheet: columns for date, provider, category, amount, payment method, reimbursement status, and notes (e.g., diagnosis or prescription). I provide clients a basic template they can copy to Google Sheets or Excel.
- Personal finance software or apps (Mint, Quicken, YNAB) can tag medical payments automatically; export data quarterly for reconciliation.
- Dedicated document storage: scan receipts and EOBs to cloud storage (Dropbox, Google Drive) or a receipt-scanning app. Keep original bills for at least three years.
- Capture supporting documents
- Receipts, itemized bills, Explanation of Benefits (EOBs), pharmacy printouts, cancelled checks, credit card statements, and HSA/FSA statements.
- For transportation, maintain a contemporaneous mileage log showing dates, miles driven, and purpose. Note the number of trips and locations.
- Reconcile quarterly
- Reconcile your spreadsheet or app export against bank and credit card statements each quarter. This avoids missing smaller recurring charges.
- Tag reimbursement status
- Track whether an expense was reimbursed by insurance, an FSA, or employer. Only unreimbursed amounts count toward Schedule A.
- Keep medical necessity documentation
- If you deduct alternative treatments (acupuncture, chiropractic care) or home modifications, keep doctor’s notes or prescriptions that establish medical necessity.
How to calculate the deductible amount (simple example)
- Example: AGI = $60,000. 7.5% threshold = $4,500.
- Total qualifying unreimbursed medical expenses = $8,000.
- Deductible amount = $8,000 − $4,500 = $3,500.
Record the full $8,000 with supporting documents, then apply the threshold on your tax return. I recommend keeping a one-page summary of totals by category to speed tax preparation and support your Schedule A entry.
Special situations and common pitfalls
- Over-the-counter medications: Generally not deductible unless prescribed by a doctor. Keep prescriptions and notes when relevant.
- HSA/FSA payments: Expenses paid with tax-advantaged accounts are not deductible on Schedule A. Track HSA distributions on Form 8889 (IRS Publication 969).
- Self-employed individuals: Health insurance premiums for self-employed taxpayers may be deductible above the line on Schedule 1 (not as itemized medical expenses). Confirm eligibility under IRS rules.
- Capital improvements: If home improvements (ramps, widened doorways) are medically necessary, only the portion attributable to medical necessity (and not increasing home value) may be deductible. Retain contractor estimates and doctor recommendations.
- Timing and bunching: If you’re near the 7.5% threshold, consider bunching elective medical procedures or payments into a single tax year to exceed the floor and maximize deductible value. See our guide on How to Bunch Medical Expenses to Itemize for tactics and timing considerations.
Documentation checklist you can use today
- Itemized bill for every medical visit or service
- Pharmacy receipts and prescription labels
- EOBs showing insurance payments and patient responsibility
- Bank/credit card statements showing payment
- HSA/FSA statements and Form 1099-SA (if distributions occurred)
- Mileage log for medical transportation
- Doctor’s notes for nonstandard or alternative care
- Records of reimbursements (if any) and dates
Maintaining this checklist as transactions occur reduces year-end scramble and helps if the IRS asks for backup.
Practical tracking template (columns to include)
- Date | Provider | Category | Amount | Paid by (card/check/HSA) | Reimbursed? (Y/N) | Reimbursement amount | Notes (diagnosis, Rx)
Add a running subtotal that sums unreimbursed expenses by category. I usually ask clients to generate a year-to-date spreadsheet we can attach to their tax file.
Tools and services I recommend
- Spreadsheet (Google Sheets or Excel) — low cost, flexible
- Receipt scanners: CamScanner, Adobe Scan, or the built-in document scan on iPhone/Android
- Personal finance apps with tagging features (Quicken, YNAB) if you already use them
- A secure cloud folder for yearly tax documents
When to seek professional help
- You have large, complicated medical claims, long-term care or home modification expenses
- You’re self-employed and need clarity on the difference between above-the-line vs. Schedule A deductions for insurance premiums
- Your total expenses are close to the AGI threshold and you want to model bunching or tax-planning strategies
If you engage a tax preparer, provide the spreadsheet and all supporting documents. In many audits, having a clean, contemporaneous record is the difference between an allowed deduction and a disallowed claim.
Related resources on FinHelp
- For step-by-step documentation guidance, see How to Document Medical Expenses for Tax Purposes (https://finhelp.io/glossary/how-to-document-medical-expenses-for-tax-purposes/).
- To learn timing strategies, read How to Bunch Medical Expenses to Itemize (https://finhelp.io/glossary/how-to-bunch-medical-expenses-to-itemize/).
- For travel-related rules, review When Medical Travel Costs May Be Tax-Deductible (https://finhelp.io/glossary/when-medical-travel-costs-may-be-tax-deductible/).
Final checklist before filing
- Confirm total unreimbursed medical expenses and compare to 7.5% of AGI
- Verify nothing on the list was paid with pre-tax or tax-advantaged dollars
- Assemble a folder (digital or paper) with receipts, EOBs, HSA/FSA statements, and any supporting medical necessity notes
- If uncertain, ask a CPA or enrolled agent to review your calculations
Professional disclaimer: This article is educational and based on general U.S. federal tax rules as of 2025. It does not constitute personalized tax advice. For guidance tailored to your circumstances, consult a qualified tax professional or CPA.
Authoritative sources
- IRS Publication 502, Medical and Dental Expenses: https://www.irs.gov/publications/p502
- IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans: https://www.irs.gov/publications/p969
- Consumer Financial Protection Bureau: https://www.consumerfinance.gov
