Are medical bills tax-deductible? Yes, but only under certain circumstances. Before claiming any medical expense deductions, there are important details to consider. For insights, Renata Bliumaite, EA prepared the list of deductions.
Eligible Expenses for Deduction You can deduct qualifying medical expenses incurred for yourself, your spouse, or dependents, including parents. Deductions are applicable once medical expenses surpass 7.5% of your adjusted gross income (AGI) for that year.
Example ##1:
If your AGI is $100,000 and total medical expenses are $7,499, you cannot deduct them, as this amount does not reach the 7.5% threshold ($7,500).
Example ##2:
If your AGI is $100,000 and medical expenses total $8,500, you exceed the 7.5% threshold. However, the deduction applies only to the excess amount over the threshold, which means you can deduct $1,000.
Keep in mind: Deductions are only available if you itemize your deductions on Form 1040 or 1040-SR. Additionally, only out-of-pocket expenses are deductible; costs covered by insurance or reimbursed through FSAs or HSAs do not qualify.
What Can Be Deducted? Deductible expenses include insurance premiums, deductibles, and copays for treatments, services, products, and medications deemed medically necessary by licensed professionals. A wide array of expenses qualify, including but not limited to:
Transportation and hotel costs (up to $50 per night per person) for medical care
Acupuncture for diagnosed conditions
Wigs for chemotherapy patients
Physical and occupational therapy
Orthodontics
Dentures
Medicare B and D payments
Ambulance services
Long-term care costs
Medical testing and screening
Mental health care
Prescription weight-loss and smoking cessation programs
Fertility treatments
Glasses and contact lenses
Birth control
Hearing aids
Condoms
Additionally, individuals with celiac disease may deduct the price difference between gluten-free and standard food items, provided there’s written documentation and a prescription for the necessity.
What Cannot Be Deducted? Certain expenses are not deductible, including those related to cosmetic procedures or non-medically necessary products. Examples include hair transplants, teeth whitening, and cosmetic surgeries. Also not deductible are certain over-the-counter medications, vitamins, supplements, and gym memberships, unless prescribed for medical conditions like obesity.
Record-Keeping Requirements If you intend to itemize deductions for medical expenses, maintain thorough records throughout the year. Whether you prefer spreadsheets or simple notes, document every payment and keep all receipts. These will be needed for your tax professional, who will retain copies but won't submit them with your tax return. In case of an IRS audit, you must substantiate that all claimed expenses were necessary and paid out of pocket. Retain any documentation from healthcare providers that confirms your medical conditions, and if necessary, request these records from them if you do not have them on hand.