Overview

Bundling medical expenses (also called “bunching” or “timing”) is a tax planning technique that concentrates qualified medical costs into one tax year so the total exceeds the IRS threshold for itemized medical deductions — currently 7.5% of adjusted gross income (AGI) for most taxpayers (see IRS Publication 502). For most people who use the cash method, medical expenses are deductible in the year they’re paid, so strategically scheduling appointments, elective procedures, or prepaying allowable costs late in a tax year can change whether you itemize and how much you deduct.

In my experience as a financial educator working with families and small-business owners, careful timing and clear records are the difference between leaving deductions on the table and realizing meaningful tax savings.

How does bundling medical expenses work?

  • Deduction threshold: The IRS allows you to deduct unreimbursed medical and dental expenses that exceed 7.5% of your AGI (see IRS Pub. 502).
  • Cash-basis rule: Most individuals use the cash method; you deduct expenses in the year you paid them. Accrual-basis taxpayers deduct when the expense is incurred.
  • Qualified expenses: Eligible costs include doctor and hospital fees, prescription medications, some long-term care costs, certain travel for medical care, and medical equipment. Expenses reimbursed by an HSA, FSA, insurance, or another party are not deductible.
  • Itemize to deduct: You must itemize deductions on Schedule A (Form 1040) to claim medical expenses; you can’t take them if you claim the standard deduction.

Source: IRS Publication 502, Medical and Dental Expenses (irs.gov).

When bundling makes sense — quick decision guide

  • You expect total unreimbursed medical costs in a single year to be close to 7.5% of AGI.
  • Your AGI is relatively stable or predictable; a lower AGI reduces the dollar amount needed to reach 7.5%.
  • You would only itemize in years when those medical costs push your total itemized deductions above the standard deduction.
  • You can legally change the timing of payments (e.g., elective procedures, durable medical equipment, or deductible travel costs).

If these conditions are met, running the numbers or using tax software simulations early in the year can help you decide whether to accelerate or delay payments.

Practical examples (simple math)

Example 1 — Family with $100,000 AGI

  • 7.5% of AGI = $7,500. If the family anticipates $6,000 in medical bills this year and $4,800 next year, separately neither year reaches $7,500.
  • By scheduling the $4,800 procedure and paying other bills in the same calendar year, total unreimbursed medical expenses become $10,800. The deductible portion = $10,800 – $7,500 = $3,300.

Example 2 — Prepaying allowable services

  • A cash-basis taxpayer can prepay a medical expense due in January by paying it in December, and the deduction applies to the year of payment. Verify the provider accepts prepayment and that the service will be performed.

Note: These examples assume no reimbursements from HSAs, FSAs, or insurers and that the taxpayer itemizes.

Key rules and limitations to watch

  • No double-dipping: Expenses paid with tax-advantaged dollars (HSA, FSA) cannot be deducted again on Schedule A.
  • Self-employed health insurance: Premiums for self-employed persons may be an above-the-line deduction separate from Schedule A; don’t count them twice.
  • Timing constraints for care: You can’t artificially manufacture medical care that’s unnecessary. Elective procedures should be medically justified and scheduled with realistic medical need.
  • Reimbursements and assignments: If your insurer or another party pays or reimburses the cost, it’s not deductible.

Authoritative reference: IRS Pub. 502; Section 213 of the Internal Revenue Code covers medical expense deductions.

Common strategies to consider

  1. Bunch elective, non-urgent care into the same calendar year (for cash-basis taxpayers). Examples: dental work, cataract surgery, some orthopedic procedures.
  2. Prepay deductible travel or lodging for medical care when permitted and when the patient will receive care in the near future.
  3. Time large purchases of durable medical equipment (wheelchairs, CPAP machines) to the year you need the deduction.
  4. Coordinate with an HSA: Use HSA funds later for reimbursed past medical expenses if you maintain records—note that you cannot deduct those same expenses if you already used tax‑advantaged funds.
  5. Use tax-projection software or talk with a tax pro before year-end to model whether bunching moves you from the standard deduction to itemizing.

In my practice I often simulate two scenarios — one where elective services are performed in Year A and another where they’re split — to show clients the tax delta, including how bunching affects AMT and the benefit of itemizing in alternating years.

Recordkeeping checklist

  • Maintain invoices, receipts, canceled checks, credit card statements, and explanation of benefits (EOBs).
  • Note the date paid, description of service, provider name, and amount paid for each expense.
  • Keep proof of non-reimbursement for each item (EOBs or a statement from insurer).
  • If you prepay for future services, keep a written agreement or invoice showing the payment date and the scheduled service.

For tips on tracking expenses, see our guide: How to Track Medical Expenses to Maximize Deductions.

Who benefits most from bundling?

  • Households with one-time, high-dollar medical events (surgery, childbirth complications, lengthy hospital stays).
  • Taxpayers with lower AGI — a lower AGI lowers the 7.5% threshold in dollars.
  • Households that narrowly miss itemizing in a typical year but could surpass the standard deduction by bunching expenses.

If your medical spending is steady and spread evenly across years (e.g., chronic, ongoing outpatient care), bundling is harder to use.

Risks and practical considerations

  • Medical necessity: Never delay essential or recommended care solely for tax reasons.
  • Cash flow: Paying many bills in one year can strain your budget; weigh tax savings against liquidity and potential interest costs if you borrow.
  • Changes in law: Tax rules can change. While the 7.5% threshold has applied in recent years, always verify the current law before acting and consult IRS guidance.

Common mistakes to avoid

  • Counting payments you expect to be reimbursed.
  • Forgetting that services paid with HSA/FSA dollars aren’t deductible.
  • Ignoring state tax differences: Some states follow federal rules; others have different thresholds or disallow certain medical deductions.

Quick year-end checklist (if you’re considering bundling now)

  • Run a tax projection for both the current and next tax year.
  • Speak with your medical providers about scheduling options and whether they accept prepayment.
  • Confirm whether an expense will be reimbursed by insurance, Medicare, an HSA, or FSA.
  • Collect and organize receipts in a dedicated folder or digital scanner.

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Professional disclaimer

This article is educational and general in nature and does not constitute tax, medical, or legal advice. Rules on medical deductions can be complex and depend on individual facts. Before scheduling major medical spending for tax reasons or making significant prepayments, consult a licensed tax professional or CPA and your medical provider.

Sources and further reading

If you’d like, I can run a sample calculation using your estimated AGI and planned expenses to show whether bundling would likely produce tax savings (you’ll need to provide AGI and projected unreimbursed medical costs).