Are Medical Expenses Tax Deductible? Here is a Simple Guide

Medical bills can take a big chunk out of your savings, especially if you face unexpected expenses not covered by health insurance. The good news? The IRS offers some help by making medical expenses deductible. This allows you to deduct certain medical costs if you itemize your deductions.

A baby being examined by the pediatrician

How Does It Work?

You can deduct qualified, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).

Here’s a simple example:

• If your AGI is $50,000 and your medical expenses are $6,000, you can deduct the amount above 7.5% of your AGI.

  
  

• Multiply $50,000 by 7.5% (or 0.075) to find the threshold:

  $50,000 x 0.075 = $3,750.

  
  

• Subtract this threshold from your medical expenses:

  $6,000 - $3,750 = $2,250.

  
  

• You can claim a deduction of $2,250.

  
  

How to Maximize Your Deduction

• Plan Ahead: If you expect big medical expenses, like surgery or braces for your child, try to group them into one year. This increases your chances of exceeding the 7.5%-of-AGI threshold.

  
  

• Include All Eligible Expenses: The deduction applies to more than just doctor visits. Don’t forget to include:

  • Prescription drugs

  • Transportation for medical appointments

  • Long-term care services

  • Certain health insurance premiums (like Medicare and long-term care policies)

Why It Matters

If your medical costs are high in a single year, this deduction can significantly lower your tax bill. By keeping good records and planning your expenses wisely, you can take advantage of this tax break to ease the financial burden of medical care.

Tip: Always save receipts and documents for any eligible medical expense you plan to deduct. It’s essential for accurate filing and potential audits.

By understanding and using this deduction, you can save money while managing medical expenses more effectively.