IRS Medical Expense Deduction: What You Need to Know

Medical expenses can be a financial burden, but the IRS allows deductions for certain costs that meet specific criteria. This deduction can reduce taxable income and lower overall tax liability. However, not all expenses qualify, and strict rules apply when claiming it.

Eligible Out-of-Pocket Costs

The IRS permits deductions for medical expenses directly related to diagnosing, treating, preventing, or alleviating a medical condition. These costs must be paid out-of-pocket and not reimbursed by insurance or other sources.

Doctor and Hospital Bills

Payments to licensed medical professionals, including physicians, surgeons, dentists, and psychologists, are deductible. This includes fees for diagnostic tests such as X-rays, MRIs, and blood work, as well as essential medical procedures like surgeries or treatments for chronic conditions. Hospital expenses, including inpatient care, nursing services, and therapy sessions, also qualify.

Specialist consultations, emergency room visits, ambulance services, and rehabilitation programs like post-surgery physical therapy are eligible. Elective procedures, such as cosmetic surgeries, do not qualify unless they correct a deformity or a condition caused by disease or trauma.

Medications and Supplies

Prescription medications are deductible if legally prescribed. Over-the-counter drugs generally do not qualify unless prescribed, but insulin is an exception.

Medical supplies like bandages, blood sugar test strips, and wheelchairs qualify if necessary for treatment. Hearing aids, crutches, and prosthetic limbs are also deductible. Long-term treatment expenses, such as oxygen tanks, CPAP machines, or home dialysis equipment, may be included. General health products like vitamins or nutritional supplements are not deductible unless prescribed for a diagnosed condition.

Certain Insurance Premiums

Health insurance premiums can be deducted under certain conditions. Premiums for medical, dental, and long-term care insurance qualify if paid with after-tax dollars. Employer-sponsored health insurance premiums deducted pre-tax from a paycheck cannot be claimed.

Self-employed individuals may deduct the full cost of their health insurance premiums, including coverage for their spouse and dependents, as an adjustment to income rather than an itemized deduction. Long-term care insurance premiums are deductible, but the allowable amount depends on the policyholder’s age. The IRS sets annual limits that increase with age. Life insurance and policies covering disability or accident insurance do not qualify.

Adjusted Gross Income Threshold

Medical expenses are deductible only if they exceed 7.5% of a taxpayer’s adjusted gross income (AGI). For the 2024 tax year, if someone has an AGI of $50,000, they can deduct medical expenses exceeding $3,750. If their total qualifying expenses amount to $5,000, they can claim a deduction of $1,250.

Since the deduction is only available to those who itemize, taxpayers must determine whether their total itemized deductions—including medical expenses, mortgage interest, state and local taxes, and charitable contributions—exceed the standard deduction for their filing status. In 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly, meaning many may not benefit from itemizing unless they have significant deductible expenses.

Filing Details

To claim the medical expense deduction, taxpayers must itemize deductions on Schedule A (Form 1040) instead of taking the standard deduction. All eligible expenses must be carefully totaled for the year, ensuring they exceed the 7.5% of AGI threshold before including them on the return.

The IRS follows a cash basis accounting method, meaning medical costs are deductible in the tax year they are paid, not when the treatment is received or when a bill is issued. If a procedure is performed in December but paid for in January, the expense must be claimed for the year the payment was made. If a credit card is used, the deduction applies to the year the charge was incurred, even if the balance is paid off later.

Medical expenses can also be deducted for dependents, including children, a spouse, or certain relatives who meet IRS dependency requirements. This applies even if the dependent does not live in the same household, as long as the filer provides over 50% of their financial support during the year. If a taxpayer covers nursing home costs for a dependent parent, those expenses may be included. Only the parent who claims a child as a dependent can deduct medical expenses they pay, regardless of custody arrangements.

Reimbursement Considerations

The IRS prohibits deductions for expenses reimbursed by insurance, employer-sponsored health plans, or other sources. If a taxpayer receives a reimbursement after claiming a deduction, the refunded amount must be reported as income in the year it is received, unless the deduction provided no tax benefit.

Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) impact deductibility. Contributions to these accounts are made with pre-tax dollars, and withdrawals for qualified medical expenses are tax-free. Since these funds already provide a tax advantage, using them to pay for medical costs disqualifies those expenses from being deducted. Similarly, if an employer offers a health reimbursement arrangement (HRA), any reimbursed medical expenses cannot be claimed.

Documentation

Proper documentation is necessary to substantiate medical expense deductions in case of an IRS audit. Taxpayers should retain detailed records, including receipts, invoices, and proof of payment. These documents should show the date of service, the provider’s name, the nature of the medical treatment, and the amount paid. Bank statements or credit card statements should also be kept as supporting evidence.

For prescription medications, pharmacy printouts listing all purchased prescriptions for the year can serve as documentation. If medical travel expenses are claimed, records such as mileage logs, toll receipts, and parking fees should be maintained. If a taxpayer pays for medical care on behalf of a dependent, additional documentation proving the relationship and financial responsibility may be required. The IRS generally recommends keeping these records for at least three years from the date the tax return is filed.