Learn About Tax Deductions for Medical Expenses

Understanding Medical Expense Tax Deductions: The Basics

Medical expense tax deductions allow taxpayers to reduce their taxable income based on certain healthcare costs they paid during the tax year. The Internal Revenue Service (IRS) permits individuals to deduct qualifying medical and dental expenses, but only if those expenses exceed a specific percentage of their adjusted gross income (AGI). For the 2023 tax year, you can deduct medical expenses that surpass 7.5% of your AGI. This threshold means that not all medical expenses result in a deduction—only the amount exceeding this percentage can be claimed.

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The IRS maintains specific rules about which expenses count toward this deduction. Common qualifying expenses include health insurance premiums, prescription medications, doctor and dentist visits, hospital stays, and vision care. However, expenses like cosmetic procedures, vitamins (unless prescribed by a doctor), and over-the-counter medications generally do not qualify. Understanding these distinctions is crucial before calculating potential deductions.

According to IRS statistics, fewer than 10% of individual tax filers claim medical expense deductions in any given year. This low percentage occurs partly because many people do not incur enough medical expenses to exceed the 7.5% threshold, and partly because many taxpayers are unaware this deduction exists. Additionally, the standard deduction—the fixed amount everyone can deduct without itemizing—exceeds the value of medical deductions for many households.

To claim medical expense deductions, you must itemize deductions on Schedule A of Form 1040, rather than taking the standard deduction. For 2023, the standard deduction was $13,850 for single filers and $27,700 for married couples filing jointly. If your total itemized deductions (medical expenses plus other deductible items like mortgage interest and state taxes) exceed these amounts, itemizing may benefit you.

Practical Takeaway: Before exploring medical expense deductions, calculate your AGI and determine whether your medical expenses exceed 7.5% of that amount. If they do, you may benefit from itemizing deductions. Keep detailed records of all medical expenses throughout the year, including receipts, bills, and explanation of benefits (EOB) statements from insurance providers.

Qualifying Medical Expenses: What the IRS Accepts

The IRS defines qualifying medical expenses as costs paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any part or function of the body. This definition covers a broader range of expenses than many people realize. Standard expenses include payments to doctors, dentists, nurses, hospitals, and other medical practitioners. Prescription medications paid out-of-pocket, even if covered by insurance, count toward the deduction.

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Insurance-related expenses also qualify. Health insurance premiums you pay yourself are deductible medical expenses. If you are self-employed, you may deduct health insurance premiums for yourself, your spouse, and your dependents. This is an important provision because self-employed individuals often pay significantly higher insurance costs than those covered through employer plans. Additionally, expenses for long-term care insurance premiums qualify, subject to age-based limits set by the IRS.

Beyond standard doctor visits, many people overlook additional qualifying expenses. These include:

• Eyeglasses, contact lenses, and eye exams
• Hearing aids and related equipment
• Artificial limbs and other prosthetic devices
• Wheelchairs and mobility aids
• Guide dogs for the blind or deaf
• Therapy costs (physical, occupational, speech, and mental health)
• Surgery and surgical procedures
• X-rays, CT scans, and diagnostic tests
• Dental work, including crowns, fillings, and orthodontia
• Acupuncture (when performed by a licensed practitioner)
• Birth control prescriptions
• Fertility treatments and related procedures

Transportation costs to receive medical care also qualify. If you drive to doctor appointments, you can deduct mileage at the IRS-set medical mileage rate. For 2023, the medical mileage rate was 21 cents per mile. You can also deduct parking fees and tolls related to medical appointments. If you take a taxi or rideshare service to medical appointments, those costs are deductible.

Some expenses that seem medical do not qualify. Cosmetic procedures like botox, chemical peels, or teeth whitening do not count, even if performed by a medical professional. Over-the-counter medications, except for insulin, generally are not deductible. Vitamins and supplements are not deductible unless prescribed by a doctor as treatment for a specific condition. Health club memberships are not deductible, even if your doctor recommends exercise. The distinction hinges on whether the expense treats an existing condition or maintains general wellness.

Practical Takeaway: Create a spreadsheet throughout the year to track medical expenses by category. Include insurance premiums, out-of-pocket medical provider costs, prescriptions, and mileage. Separate questionable items so you can research their deductibility or discuss them with a tax professional. Save all receipts and insurance statements to substantiate your claims if the IRS requests documentation.

Calculating Your Medical Expense Deduction

Calculating your medical expense deduction involves several steps. First, gather all documentation of medical expenses you paid during the tax year. The IRS does not require you to submit receipts with your tax return, but you must maintain records in case of an audit. Next, add up all qualifying medical expenses. This total should include insurance premiums, doctor and dental bills, medications, medical devices, and transportation costs related to medical care.

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Once you have your total medical expenses, calculate your adjusted gross income (AGI). Your AGI appears on your tax return and includes income from wages, self-employment, interest, dividends, and other sources, minus specific deductions like student loan interest and traditional IRA contributions. Many tax software programs calculate your AGI automatically.

Now perform the key calculation: multiply your AGI by 7.5% to find the threshold. Only medical expenses exceeding this threshold are deductible. For example, if your AGI is $60,000, your threshold is $4,500 (60,000 × 0.075). If your total medical expenses are $7,000, you can deduct $2,500 ($7,000 − $4,500). If your total medical expenses are only $4,000, you cannot deduct any amount because they do not exceed the threshold.

Here is a more detailed example with a family scenario. Sarah and her husband Tom file jointly and have a combined AGI of $100,000. Their 7.5% threshold is $7,500. During the tax year, they paid:

• Health insurance premiums: $4,200
• Doctor visits and urgent care: $1,800
• Prescription medications: $950
• Dental work: $2,100
• Medical mileage (2,000 miles at $0.21/mile): $420
• Contact lenses and eye exams: $380

Their total medical expenses are $9,850. Subtracting the $7,500 threshold leaves a deductible amount of $2,350. This $2,350 would be entered on Schedule A as part of their itemized deductions.

Important considerations affect this calculation. If you are married and file separately, each spouse calculates the deduction using their own income and expenses, and the 7.5% threshold applies to each separately. If you paid medical expenses for a spouse or dependent, those expenses count toward your household deduction if they meet other IRS requirements (such as dependency status). Medical expenses paid with pretax dollars through a health savings account (HSA) or flexible spending arrangement (FSA) cannot be deducted again; you can only deduct out-of-pocket amounts paid with after-tax dollars.

Practical Takeaway: Use a simple calculator or spreadsheet to compute your potential deduction before you file taxes. This helps you determine whether itemizing deductions (which includes medical expenses) would save you money compared to taking the standard deduction.