US Medical Expense Tax Deduction Explained
If you have significant out-of-pocket medical expenses, you may be able to reduce your federal income tax by deducting those expenses on Schedule A (Itemized Deductions). The key rule: only expenses above 7.5% of your Adjusted Gross Income (AGI) are deductible.
How the Deduction Works
Step 1: Calculate 7.5% of your AGI — this is your floor. Step 2: Subtract the floor from your total qualifying medical expenses. Step 3: Multiply the excess by your marginal tax rate to estimate your tax savings.
Example: AGI $70,000, medical expenses $10,000. Floor = $5,250 (7.5%). Deductible amount = $4,750. Tax savings at 22% = $1,045.
Qualifying Medical Expenses
Include: physician and hospital costs, dental and vision care, prescription medications, mental health treatment, medical equipment (wheelchairs, hearing aids), long-term care, and transportation to medical appointments. Exclude: cosmetic procedures, gym memberships, insurance premiums paid pre-tax by your employer.
Important Considerations
This deduction only helps if you itemize your deductions rather than taking the standard deduction. Compare your total itemized deductions to the standard deduction ($14,600 single, $29,200 MFJ in 2024) to determine which is larger.
Frequently Asked Questions
You can deduct health insurance premiums you pay with after-tax money. Premiums paid through a pre-tax employer plan are already excluded from your income and cannot be deducted again.
Yes. Self-employed individuals can deduct 100% of health insurance premiums as an above-the-line deduction (reducing AGI), regardless of whether they itemize.
* For illustration only. Consult a tax professional or IRS Publication 502 for authoritative guidance.