The Medical Deduction After Tax Reform
Understand the permanent rules for the medical expense deduction following tax reform and learn how to assess if it's a valuable option for your tax return.
Recent tax reforms have altered the landscape for claiming medical costs, making it important to understand the current framework. This guide clarifies the existing rules, helping you determine if you can benefit from this deduction.
The AGI Threshold After Tax Reform
The ability to deduct medical expenses is tied to a taxpayer’s adjusted gross income (AGI). The Affordable Care Act (ACA) had established a 10% AGI floor, making the deduction difficult for many to claim. The Tax Cuts and Jobs Act (TCJA) of 2017 provided temporary relief by lowering this threshold to 7.5%. After a series of extensions, this more accessible 7.5% floor was made permanent by the Taxpayer Certainty and Disaster Tax Relief Act of 2020.
What Expenses Qualify for the Deduction
The IRS defines medical care broadly to include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease. This encompasses payments made to physicians, dentists, surgeons, chiropractors, psychiatrists, and other medical practitioners. The cost of hospital care, including inpatient meals and lodging, and nursing home care are also included if the primary reason for being there is to receive medical care.
Prescription medications and insulin are deductible, but over-the-counter drugs are not, even if recommended by a doctor, unless they are insulin. Payments for health insurance premiums can be included, provided they are paid with after-tax dollars. This means premiums paid by an employer are not deductible by the employee, but costs for COBRA coverage or private plans can be.
Certain less obvious expenses also qualify. The cost of transportation primarily for and essential to medical care is deductible. This can be calculated as the actual cost of gas and oil, or by using the standard medical mileage rate, which is 21 cents per mile for 2025. Modifications to your home, such as installing ramps or widening doorways to accommodate a disability, can be included to the extent the costs exceed any increase in the property’s value.
Expenses that are merely beneficial to general health, such as vitamins, a gym membership, or non-prescription wellness products, cannot be included. Cosmetic surgery is also generally not deductible unless it is necessary to improve a deformity arising from a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Any expense that is reimbursed by insurance or another source cannot be deducted.
How to Claim the Deduction
Claiming the medical expense deduction requires taking the standard deduction or itemizing deductions. The TCJA significantly increased the standard deduction amounts, which means fewer taxpayers now benefit from itemizing. A taxpayer should only itemize if their total itemized deductions, including medical expenses, state and local taxes (capped at $10,000), and mortgage interest, exceed their applicable standard deduction amount.
Once you have determined that itemizing is beneficial and have totaled all your qualifying medical expenses, the next step is the calculation. You must subtract 7.5% of your AGI from your total medical costs. The remaining amount is what you can deduct. For example, if your AGI is $60,000 and you have $7,000 in qualifying medical expenses, you would first calculate the AGI threshold ($60,000 x 0.075 = $4,500). Your deductible amount would be $2,500 ($7,000 – $4,500).
The final step is to report this deductible amount on your tax return. The figure is entered on line 4 of Schedule A (Form 1040), Itemized Deductions. This form is then filed along with your main Form 1040. It is important to keep detailed records, such as receipts and statements, to substantiate all claimed medical expenses in case of an IRS inquiry.