Can You Deduct Out-of-Pocket Medical Expenses on Your Taxes?

Medical expenses can add up quickly, and many taxpayers wonder if they can ease the financial burden by deducting these costs on their tax return. The IRS allows deductions for certain medical expenses, but specific rules determine eligibility.

Medical Costs That May Qualify

The IRS permits deductions for expenses related to diagnosing, treating, preventing, or alleviating a physical or mental condition. Eligible costs include payments to doctors, dentists, surgeons, and other healthcare providers, as well as hospital care, prescription medications, and medically necessary equipment.

Mental health services, including therapy and psychiatric care, also qualify. This extends to substance abuse treatment programs such as inpatient rehabilitation and counseling. Long-term care services may be deductible if they meet IRS criteria for medical necessity.

Medical supplies like wheelchairs, crutches, hearing aids, and prescription eyeglasses are eligible. Home modifications, such as installing ramps or widening doorways for medical reasons, may qualify if they do not increase property value. Transportation costs for medical care—including mileage for driving to appointments, public transit fares, and ambulance services—can also be deducted.

Insurance Reimbursement Effects

Only unreimbursed medical expenses can be deducted. If insurance covers part of a medical bill, that portion is ineligible. If a taxpayer deducts an expense in one year and later receives reimbursement, the reimbursed amount must be reported as income.

Employer-sponsored health reimbursement arrangements (HRAs) and flexible spending accounts (FSAs) further limit deductions. Since contributions to these accounts are made with pre-tax dollars, expenses paid using these funds cannot be deducted again. Similarly, health savings account (HSA) reimbursements make those expenses ineligible, as HSAs provide tax benefits at the time of contribution.

For those receiving assistance from Medicaid or the Children’s Health Insurance Program (CHIP), only out-of-pocket costs beyond what these programs cover can be deducted.

Itemizing Deductions

Medical expenses are deductible only if they exceed 7.5% of a taxpayer’s adjusted gross income (AGI). For example, if someone has an AGI of $50,000, only medical expenses exceeding $3,750 can be deducted. If total qualified expenses amount to $5,000, they can deduct $1,250.

Since medical expenses fall under itemized deductions, taxpayers must choose between itemizing and taking the standard deduction. The standard deduction for 2024 is $14,600 for single filers, $29,200 for married couples filing jointly, and $21,900 for heads of household. If total itemized deductions—including medical expenses, state and local taxes, mortgage interest, and charitable contributions—do not exceed the standard deduction, itemizing offers no tax benefit.

Those who itemize must file Schedule A (Form 1040) and provide a detailed breakdown of medical expenses. Only qualifying expenses should be included.

Recordkeeping Essentials

Thorough documentation is necessary when claiming medical deductions, as the IRS may request proof. Taxpayers should keep receipts, invoices, and statements detailing the expense, date of service, and amount paid. Bills from medical providers, pharmacy records for prescriptions, and statements from healthcare facilities should be retained. Bank and credit card statements alone are insufficient unless accompanied by itemized bills specifying the medical nature of the expense.

Organizing records by tax year and category helps in calculating deductible amounts. A structured system—whether digital or physical—should separate payments for medical procedures, prescriptions, and transportation costs. Tracking expenses monthly can prevent smaller costs from being overlooked.

Health-related expenses for dependents or spouses should be documented separately when filing jointly. If payments are made via check or electronic transfer, retaining copies of canceled checks or transaction confirmations provides additional proof.