Can I Deduct Medical Expenses From Taxes? Here’s What to Know

Understanding the nuances of tax deductions for medical expenses can significantly impact financial planning. Knowing what qualifies and how to claim these deductions is crucial, as it may lead to substantial savings on your tax bill.

This guide explores eligibility, qualifying costs, and the process of itemizing these expenses on tax returns.

Eligibility Criteria

To deduct medical expenses from taxes, it’s important to understand the eligibility criteria set by the Internal Revenue Service (IRS). As of the 2024 tax year, taxpayers can deduct medical expenses exceeding 7.5% of their adjusted gross income (AGI). For example, with an AGI of $50,000, only expenses above $3,750 are deductible.

Eligibility also depends on filing status and the nature of the expenses. Deductions apply to medical costs incurred for the taxpayer, their spouse, or dependents, such as children or other relatives meeting IRS dependency criteria. Ensuring the individual qualifies as a dependent is essential to avoid disallowed claims.

Only expenses paid within the tax year are deductible. For example, if a procedure is paid for in December 2024, it would be included on the 2024 tax return. Individual taxpayers must use the cash basis accounting method, which recognizes expenses when paid.

Qualifying Costs

Medical expenses must primarily address the prevention or alleviation of a physical or mental defect or illness to qualify under IRS guidelines.

Treatments and Procedures

Deductible treatments include surgeries, doctor visits, and hospital care, as outlined in IRS Publication 502. Medically necessary surgeries, hospital fees, and anesthesia qualify, while elective cosmetic surgeries generally do not unless correcting deformities from congenital abnormalities, injuries, or diseases. Diagnostic services, including X-rays and lab tests, are also deductible. Detailed records, such as invoices and receipts, are crucial to substantiate claims during an audit.

Prescription Medications

Prescription medications, including prescribed drugs and insulin, are deductible. Over-the-counter medications generally do not qualify unless prescribed. For example, prescribed medication for a chronic condition is deductible, while non-prescription pain relievers are not. Taxpayers should keep copies of prescriptions and pharmacy receipts to verify expenses. Medical supplies like bandages or crutches prescribed by a healthcare provider are also deductible.

Assistive Devices

Assistive devices, such as wheelchairs, hearing aids, and eyeglasses, are eligible for deductions. For example, purchasing a wheelchair for mobility assistance qualifies. Expenses for service animals, including their training and maintenance, are also deductible if used for medical purposes. Documentation, such as purchase receipts and medical necessity letters, should be retained to support claims.

Itemizing on Tax Returns

Itemizing medical expenses on tax returns requires understanding IRS guidelines. Taxpayers must decide between the standard deduction and itemizing. For the 2024 tax year, the standard deduction is $13,850 for single filers and $27,700 for married couples filing jointly. Itemizing is only beneficial if total deductions, including medical expenses, exceed these amounts.

Once itemizing is chosen, compile all eligible medical expenses and document them on Schedule A of Form 1040. Expenses must be categorized correctly under medical and dental expenses to avoid disallowance. Transportation costs for medical care, such as mileage driven to a hospital, are deductible at the 2024 rate of 22 cents per mile. Keeping a mileage log is essential for substantiating claims.

Itemizing also allows deductions for other expenses like mortgage interest and charitable contributions, potentially maximizing total deductions. However, itemizing requires more documentation and effort than the standard deduction, so taxpayers should weigh the benefits against the administrative burden.

Records and Documentation

Maintaining accurate records is essential for deducting medical expenses. The IRS requires reliable documentation for every claim on Schedule A. Receipts, invoices, and statements should clearly indicate the date, amount, and purpose of each expense.

Organizing records efficiently simplifies tax filing and ensures compliance. Digital tools, such as cloud storage or financial management software, can help categorize and protect documents. A spreadsheet summarizing expenses linked to corresponding documentation can provide clarity and quick access.

Insurance Reimbursements

Only unreimbursed medical expenses qualify for deductions. For example, if surgery costs $10,000 and insurance reimburses $7,000, only the remaining $3,000 is deductible. This ensures taxpayers cannot claim deductions for costs covered by insurance.

If an insurance reimbursement is received in a subsequent year for an expense deducted previously, the reimbursed amount must be reported as income in the year it is received. For example, if $5,000 was deducted in 2023 and $2,000 reimbursed in 2024, the $2,000 must be included as taxable income for 2024. Detailed records of expenses and reimbursements are essential for compliance.

Expenses paid with health savings accounts (HSAs) or flexible spending accounts (FSAs) cannot also be deducted, as these accounts use pre-tax contributions. For example, prescription costs paid through an FSA are ineligible for deduction. Tracking which expenses were paid out-of-pocket versus through an HSA or FSA is critical to avoid errors. Proper planning is key when using tax-advantaged accounts alongside deductions.