Medical costs, such as the cost of doctor’s visits, prescription drugs, and unexpected surgeries, can quickly overwhelm a household’s finances. If you incurred large out-of-pocket medical expenses during the year, the IRS may allow you to deduct some of those expenses on your federal tax return. Medical expense deductions are only available for unreimbursed eligible expenses that exceed 7.5% of your adjusted gross income (AGI). You should also itemize your deductions rather than taking the standard deduction. Below, we explain who qualifies, which medical expenses are deductible, and how to determine whether itemizing will reduce your tax bill.
What is medical expense deduction?
The medical expense deduction allows eligible taxpayers to deduct some unreimbursed medical expenses from their taxable income. When you file your federal tax return, you claim deductions on Schedule A (itemized deductions).
Unlike tax credits, which reduce your tax bill dollar for dollar, medical expense deductions reduce your taxable income. The amount you save depends on your tax bracket and total itemized deductions.
Medical expenses eligible for general tax deductions
The IRS allows you to deduct medical expenses not covered by your insurance, regardless of whether your insurance company paid the provider directly or sent you a refund.
Qualified expenses include all payments made for the diagnosis, mitigation, cure, treatment, or prevention of disease. Here we introduce some common medical expenses that are eligible for deduction.
Doctor and hospitalization costs
- doctor’s visit
- surgery and procedures
- hospitalization
- expert care
- emergency room care
- diagnostic test
prescription drugs
- prescription drugs
- insulin
dental and vision care
- dental treatment
- oral surgery
- glasses
- contact lenses
- eye examination
health insurance premium
Health insurance premiums are covered if you pay them out of pocket. This includes certain Medicare, marketplace health insurance, and COBRA premiums. Medicare premiums deducted directly from Social Security benefits are also eligible for tax relief.
Improving medical equipment and accessibility
- wheelchair
- hearing aid
- prosthesis
- Certain home modifications such as ramps and stairlifts
Expenses that are usually not covered
Not all health-related expenses qualify for tax relief. Non-deductible expenses include:
- Medically unnecessary cosmetic procedures
- Over-the-counter drugs
- General health club or gym membership
- Most vitamins and dietary supplements
- funeral or burial expenses
Who can claim medical expenses?
If you meet all of the following requirements, you will be eligible for medical expense deduction.
- Qualified unreimbursed medical expenses exceed 7.5% of adjusted gross income (AGI).
- Itemize your deductions on Schedule A instead of claiming the standard deduction.
- Expenses were paid for you, your spouse, or a qualifying dependent and were not reimbursed by insurance, a health savings account (HSA), a flexible spending account (FSA), or any other source.
For example, if your AGI is $100,000, the first $7,500 of qualified medical expenses are not deductible. If you pay $10,000 in qualified unreimbursed medical expenses, you can deduct $2,500, the amount that exceeds the 7.5% threshold.
A dependent is defined as an eligible child or relative who depends on you for financial support. If you have children, they are considered dependents until the age of 19 or 24 if you are a full-time student.
Are my parents’ medical expenses eligible for deduction?
If your parent is a dependent, you can claim for medical expenses paid on your parent’s behalf. Parents must:
- get more than half of the financial support from you
- Total income is less than $5,050
The IRS requires some dependents to live with you year-round, but makes exceptions for immediate relatives such as parents.
There is no set limit on the amount you can claim for your parents’ medical expenses. Standard medical expense deduction rules apply.
What are the most overlooked tax breaks?
While the costs of surgeries and prescriptions are easy to identify, other eligible medical expenses may be less obvious.
“Missed round-trip miles to appointments is common,” says Chad Gammon, certified financial planner, registered agent, and owner of Custom Fit Financial. “You can also deduct parking fees and tolls to get to your appointment.”
The current IRS medical mileage rate is 21 cents per mile. Here are some other often overlooked expenses you can include when claiming tax relief for medical expenses.
- Nursing care costs: These may include assisted living and nursing care costs that were not reimbursed by insurance.
- Medicare premium: If you pay for Medicare Supplement (Medigap) coverage for Medicare Parts B, C, and D, you may be able to deduct these costs.
- Medical expenses for dependents: In many cases, you can deduct medical expenses you pay on behalf of a dependent, such as an adult child or elderly parent who qualifies as a dependent.
By remembering to include these often overlooked payments, you may be able to exceed the 7.5% AGI threshold for medical expense tax relief.
Does the medical expense deduction change depending on income?
Unlike some tax refunds and credits, medical expense credits have no minimum or maximum income limits. Instead, eligibility is determined by how much you spend to qualify for unreimbursed medical expenses compared to your AGI.
Because only expenses that exceed 7.5% of AGI are deductible, lower-income taxpayers may reach the threshold with fewer medical expenses than higher-income taxpayers.
For example, a person with an AGI of $40,000 can begin claiming the deduction after paying at least $3,000 in qualified medical expenses. A taxpayer with an AGI of $150,000 will not qualify until their qualified expenses exceed $11,250.
Although income does not determine eligibility by itself, it does affect how much you have to spend on medical expenses before the deduction becomes available.
Do I need to itemize my deductions?
Even if you are eligible for medical expense deductions, itemizing only makes sense if the total amount of itemized deductions exceeds the standard deduction for your filing status.
Taxpayers with unusually high medical expenses, such as those managing a chronic illness, recovering from major surgery, or supporting a family member with significant medical needs, may find that their total itemized deductions are larger than the standard deduction, making itemizing a more beneficial option.
In addition to medical expenses, itemized deductions may include mortgage interest, certain state and local taxes, and charitable contributions.
Steps to receive medical expense deduction
If a medical expense deduction is appropriate for your situation, you can apply for the deduction by following these steps:
- Step 1: Gather your documents. This may include medical bills, pharmacy receipts, payment records (such as bank or credit card statements), and insurance statements showing unreimbursed expenses.
- Step 2: Calculate eligible expenses. When totaling your eligible medical expenses, exclude expenses reimbursed by insurance.
- Step 3: Apply AGI thresholds. Calculate what 7.5% of your AGI is. Then subtract that amount from your total eligible expenses. The difference is how much you can deduct.
- Step 4: Itemize your deductions on Schedule A. This form allows you to claim medical expenses above the 7.5% threshold, along with state taxes, mortgage interest, and charitable contributions.
If the total of your itemized deductions is less than the standard deduction, it probably doesn’t make sense to claim itemized medical deductions. In this case, you can save more money by skipping the medical expense deduction and claiming the basic deduction instead.
When to seek help from a tax professional
If your situation is relatively simple, you may feel comfortable manipulating the medical expense deduction yourself. However, taxpayers in more complex situations may benefit from a tax professional.
For example, working with a tax professional may be helpful in the following cases:
- Major surgery or other medical incident
- Complex family situation with unclear dependency status
- Support for elderly parents
- Long-term care or nursing home costs
- Large itemized deductions in multiple categories
- Mix of insurance reimbursement and co-payments
“It can be good to see your situation with a second set of eyes,” says Gammon. “It can be difficult if you are self-employed, run a business, or live in multiple states. Other major life events, such as divorce, retirement, or inheritance, can also create additional problems.”
A qualified tax professional can help you navigate complex situations and ensure proper compliance with IRS regulations. It helps you make the most of your medical tax credit without overcharging your taxes.
conclusion
The IRS offers tax relief for medical expenses, but strict eligibility requirements apply. You can only claim eligible medical expenses that exceed 7.5% of your adjusted gross income that were not reimbursed by your insurance. Additionally, you must itemize rather than claim the basic deduction.
Regular medical expenses alone may not qualify you, but if you paid for a significant medical event for yourself, your spouse, or a dependent, you’re more likely to qualify. Low-income borrowers have a lower threshold than higher-income borrowers because medical costs can be a higher percentage of their salary.
As with most tax relief programs, the benefits are highly dependent on your personal financial situation. You can determine whether a medical expense deduction makes sense for you by evaluating your income and eligible expenses or, in more complex situations, by working with a tax professional.
Frequently asked questions about medical expense deduction
What are the IRS rules regarding medical expenses?
The IRS allows you to deduct qualified unreimbursed medical expenses in excess of 7.5% of your adjusted gross income, but only if you itemize rather than take the standard deduction. You can deduct qualified medical expenses you pay for yourself, your spouse, or your dependents.
Is it worth claiming medical expenses on taxes?
If your itemized deductions exceed the standard deduction, it may be worth claiming your medical expenses on your taxes. Your itemized deductions may be higher if you pay more for things like medical expenses, state and local taxes, mortgage interest, and donations to charities.
Can I claim my parents’ medical expenses?
If your parents qualify as dependents under IRS rules, you can claim their qualified medical expenses. If your parents have a combined income of less than $5,050 and receive more than half of their financial aid, you may qualify.
What is the maximum deduction for medical expenses for parents?
There is no cap on medical expense deductions for parents, but you can only claim eligible expenses that exceed 7.5% of your AGI. In addition, taxes must be itemized and parents must qualify as dependents under IRS guidelines.
What medical expenses are not deductible?
Non-deductible medical expenses include voluntary cosmetic procedures, gym memberships, non-prescription supplements, and other personal medical expenses that are not medically necessary or require a doctor’s prescription.
