Quick answer
Medical expenses become tax-deductible when your total unreimbursed qualifying medical and dental costs for the year exceed 7.5% of your adjusted gross income (AGI), and you itemize deductions on Schedule A (Form 1040). See IRS Publication 502 and IRS Topic No. 502 for full rules and examples (IRS Publication 502: https://www.irs.gov/publications/p502; IRS Topic No. 502: https://www.irs.gov/taxtopics/tc502).
How the 7.5% threshold works — step by step
- Calculate your AGI. This is the number near the bottom of Form 1040 before standard or itemized deductions.
- Compute 7.5% of that AGI. That amount is your personal threshold for medical deductions.
- Total all qualifying unreimbursed medical expenses for the year.
- Subtract the threshold from your total medical expenses. The remainder is the amount you may claim on Schedule A as an itemized deduction.
Example (simple):
- AGI: $60,000 → 7.5% threshold = $4,500
- Total qualifying medical expenses: $8,000
- Deductible amount = $8,000 − $4,500 = $3,500 (if you itemize)
In my practice, I’ve seen taxpayers miss legitimate deductions because they either used the standard deduction or forgot to subtract reimbursements. Always compare itemizing to the standard deduction before claiming medical expenses.
What counts as a qualifying medical expense?
The IRS defines qualifying medical and dental expenses broadly but with some important limits and exclusions. Typical qualifying costs include:
- Payments to doctors, surgeons, dentists, and specialists
- Prescription medications and insulin
- Hospital stays and related services
- Medical equipment (crutches, wheelchairs, prosthetics)
- Dental and vision care when necessary
- Long-term care services (when they meet IRS rules)
- Transportation costs for medical care (public transportation, ambulance, taxi; or the standard medical mileage rate for your car)
- Premiums for medical and dental insurance in many situations (see below for limits)
Typical non-qualifying items:
- Cosmetic procedures (unless necessary to correct a deformity or injury)
- Most over-the-counter drugs (unless prescribed)
- General health items (gym memberships are rarely deductible)
For a detailed list and nuanced rules (for example, cosmetic surgery and long-term care), consult IRS Publication 502: https://www.irs.gov/publications/p502.
Special rules and items to watch
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Health insurance premiums: Premiums may be deductible as medical expenses on Schedule A if they are not already paid with pre-tax dollars. Self-employed taxpayers generally can deduct health insurance premiums above-the-line (reduce AGI) instead of as an itemized medical deduction (see IRS guidance for self-employed deductions).
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HSAs and FSAs: Contributions to a Health Savings Account (HSA) and many Flexible Spending Accounts (FSAs) are already tax-advantaged (pre-tax or above-the-line). You cannot double-dip by deducting expenses paid with tax-free HSA/FSA money. Conversely, contributing to an HSA reduces AGI, which can indirectly lower the 7.5% threshold you must exceed.
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Reimbursements: Only unreimbursed costs count. If your insurer, employer, or another party reimburses part of a bill, exclude the reimbursed amount from your total.
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Transportation and lodging: Costs to travel primarily for medical care may be deductible. You may choose between actual expenses (bus, taxi fares, parking, tolls) or use the IRS medical mileage rate for car travel. See the FinHelp piece on when medical travel costs may be tax-deductible for practical examples and documentation tips: When Medical Travel Costs May Be Tax-Deductible (https://finhelp.io/glossary/when-medical-travel-costs-may-be-tax-deductible/).
Examples and scenarios
1) Single taxpayer with routine care
- AGI: $50,000 → threshold = $3,750
- Total out-of-pocket qualifying expenses: $4,800
- Deduction: $4,800 − $3,750 = $1,050 (only meaningful if itemizing)
2) Family with major medical event
- AGI: $80,000 → threshold = $6,000
- Medical bills (hospital, surgery, medication): $15,000
- Deduction: $15,000 − $6,000 = $9,000 (could materially reduce tax liability if itemized)
3) Self-employed taxpayer
- Self-employed individuals should separately track health insurance premiums. They may be eligible for an above-the-line deduction for their premiums (reducing AGI) and thus lowering the 7.5% threshold. I frequently recommend clients run both calculations — itemized medical deduction vs. above-the-line self-employed health insurance deduction — to find the best outcome.
Strategies to maximize deductible medical expenses
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Bunch expenses: If you can time elective but necessary procedures (dental work, glasses, hearing aids), grouping them into a single tax year may help you exceed the 7.5% AGI threshold. See our guide on how to bunch medical expenses to itemize for step-by-step tactics: How to Bunch Medical Expenses to Itemize (https://finhelp.io/glossary/how-to-bunch-medical-expenses-to-itemize/).
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Use an HSA strategically: Contribute to an HSA to lower AGI and pay qualified expenses tax-free. But remember, expenses paid with HSA funds are not deductible on Schedule A.
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Track transportation and lodging: Keep receipts, mileage records, and statements that show the medical purpose of trips. Transportation can add up and push you over the threshold.
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Time reimbursements and insurance payments: If you expect an insurer to reimburse a portion of a bill, note the timing; an expense reimbursed in a later year counts only in the year reimbursed.
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Consider filing status: Married couples should calculate the deduction both on separate returns and a joint return (typically joint returns yield a better result for medical deductions) because the 7.5% threshold is based on household AGI when filing jointly.
Recordkeeping checklist (what to keep and for how long)
- Itemized receipts and invoices from medical providers
- Pharmacy receipts and prescription labels
- Explanation of benefits (EOBs) showing payments and reimbursements
- Insurance premium statements and proof of payment
- Mileage logs (date, miles driven, purpose, and destination) for medical trips
- Credit card statements that match medical payments
- Notes on medical necessity for ambiguous items (e.g., cosmetic surgery required after injury)
Keep records for at least three years after you file the return, and longer if you claim carryovers or there’s an ongoing audit risk. IRS Publication 502 and IRS recordkeeping guidance describe documentation standards.
Common mistakes and how to avoid them
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Failing to compare itemizing to the standard deduction: If your total itemized deductions (including medical) are less than the standard deduction, you won’t benefit from claiming medical expenses.
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Counting reimbursed costs: Subtract any reimbursements from insurance or third parties before claiming the deduction.
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Mixing HSA/FSA-paid expenses into itemized claims: If you used HSA/FSA funds, those particular expenses are not eligible for an itemized medical deduction.
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Poor documentation: Without receipts and EOBs, an IRS inquiry may disallow claims.
When it’s not worth tracking every small expense
If you have relatively low medical spending and your total is unlikely to exceed 7.5% of AGI, the time invested in tracking every copay or over-the-counter purchase may not be worthwhile. Focus recordkeeping on larger bills, insurance premiums, and items most likely to push you past the threshold.
Links to related FinHelp articles
- Learn when medical travel costs may be deductible: When Medical Travel Costs May Be Tax-Deductible (https://finhelp.io/glossary/when-medical-travel-costs-may-be-tax-deductible/).
- Bunching tactics to help you itemize medical expenses: How to Bunch Medical Expenses to Itemize (https://finhelp.io/glossary/how-to-bunch-medical-expenses-to-itemize/).
- Documentation best practices for claiming medical deductions: Maximizing Medical Expense Deductions: Documentation Tips (https://finhelp.io/glossary/maximizing-medical-expense-deductions-documentation-tips/).
Professional perspective
In my 15+ years advising clients, the most common missed opportunities are: (1) failing to deduct travel and lodging related to care, (2) not using HSAs to reduce AGI where appropriate, and (3) not timing elective procedures strategically. I recommend an annual checklist: estimate likely medical costs, compare itemizing to the standard deduction by October, and postpone or accelerate elective services where clinically safe and financially helpful.
When to get professional help
If you face large medical bills, recurring long-term care expenses, or complicated insurance reimbursements, consult a tax professional or CPA. Complex items like long-term care insurance premium limits, interactions with state rules, and business-owner health insurance require tailored advice.
Disclaimer
This article is educational and does not replace personalized tax advice. Rules and interpretations can change; always confirm current details with IRS Publication 502 (https://www.irs.gov/publications/p502) or a qualified tax professional before making tax decisions.
