Is There a Tax Break for Cancer Patients?

Dealing with cancer is physically, emotionally, and financially challenging. Treatments, medications, travel, and lost income add up quickly, making it essential to explore financial relief options, including tax breaks. Certain medical expenses may be deductible, and specific provisions can help offset costs. Understanding these options can ease the financial strain.

Qualifying Medical Expenses Under Tax Regulations

The IRS allows taxpayers to deduct medical expenses exceeding 7.5% of their adjusted gross income (AGI) if they itemize deductions on Schedule A of Form 1040. Eligible expenses include chemotherapy, radiation, surgeries, hospital stays, and prescription medications.

Medical equipment such as wheelchairs, prosthetics, and home modifications—like ramps or widened doorways—can also be deducted if necessary for mobility or accessibility. Transportation costs for medical care, including mileage, parking fees, tolls, and airfare for out-of-state treatment, may qualify. The IRS updates the standard mileage rate for medical travel annually.

Insurance premiums for policies covering medical care, including long-term care insurance (subject to age-based limits), can be deducted if paid out-of-pocket and not reimbursed by an employer or government program. Copayments, deductibles, and other uncovered costs also qualify. Experimental treatments and participation in clinical trials may be deductible if deemed medically necessary.

Disability Deductions for Permanent Conditions

A cancer diagnosis can sometimes lead to long-term impairments that affect a person’s ability to work. When a condition is considered permanent, additional tax benefits may be available. The IRS does not define permanent disability under a single standard, but eligibility often depends on whether the impairment significantly limits major life functions and is expected to last indefinitely.

Individuals unable to work due to their condition may qualify for the Disability Tax Credit (DTC) or other relief programs, depending on income and filing status. Those receiving Social Security Disability Insurance (SSDI) generally do not owe taxes on benefits unless total income exceeds $25,000 for single filers or $32,000 for married couples filing jointly in 2024.

Some individuals with permanent disabilities may also be eligible for tax-advantaged savings accounts, such as ABLE (Achieving a Better Life Experience) accounts. These allow tax-free growth on contributions used for qualified disability-related expenses, including medical care, assistive technology, and housing. The annual contribution limit is $18,000 in 2024, with additional contributions allowed for those earning income.

Potential Hardship Exemptions

Cancer treatment often creates financial strain, making it difficult for some individuals to meet tax obligations. In cases of extreme hardship, the IRS offers exemptions and relief options. One option is requesting a temporary delay in tax collection due to financial hardship, known as “Currently Not Collectible” (CNC) status. This does not eliminate tax debt but prevents the IRS from enforcing collection actions while the individual is unable to pay.

For those facing substantial medical-related financial distress, an Offer in Compromise (OIC) may allow them to settle tax debt for less than the full amount owed. Eligibility is based on income, expenses, asset equity, and overall ability to pay. The IRS considers medical hardship when evaluating OIC applications, particularly when ongoing treatment costs significantly reduce disposable income. Applying for an OIC requires detailed financial disclosures, and approval rates vary.

Taxpayers who miss filing or payment deadlines due to medical hardship may qualify for penalty abatements. The IRS may waive failure-to-file or failure-to-pay penalties if the taxpayer can demonstrate reasonable cause, such as prolonged hospitalization or incapacitation. Interest on unpaid taxes continues to accrue, but penalty relief can reduce the overall financial impact.

Documenting Out-of-Pocket Costs

Keeping detailed records of unreimbursed medical expenses is necessary when seeking tax deductions or financial relief. Proper documentation substantiates claims in case of an IRS audit and ensures all eligible costs are accounted for. Receipts, invoices, and bank statements should be collected for every medical-related expense, including payments to healthcare providers, pharmacies, and medical supply vendors. Organizing these records by category—such as treatment costs, prescription expenses, and assistive devices—can streamline tax filing.

Patients who set up monthly payment agreements with hospitals or specialty clinics should track payments carefully. While these payments may be deductible, only amounts paid within the tax year can be claimed. Keeping copies of payment schedules and transaction records ensures accurate reporting.

For those using Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs), it is important to distinguish between reimbursed and unreimbursed expenses. Withdrawals from these accounts for qualified medical expenses are tax-free, but any amount reimbursed through an HSA or FSA cannot be deducted again. Maintaining a ledger of HSA disbursements alongside out-of-pocket payments prevents duplicate claims and ensures compliance with IRS regulations.