Are medical expenses tax deductible?
December 15, 2022 6 min read
Tax deductions for medical expenses can seem as complicated as open-heart surgery. But understanding which medical bills might qualify and how to claim them on a tax return could help. Expenses like copays, deductibles, coinsurance, prescriptions and medically necessary home improvements could be eligible.
Learn how the IRS treats tax deductions for various medical expenses.
- It’s possible to receive a tax break for medical expenses by itemizing deductions, but a standard deduction could still end up being the better option.
- Medical expenses that can qualify for tax deductions—as long as they’re not reimbursed—include copays, deductibles and coinsurance.
- An assortment of medical products, such as prescription eyeglasses, hearing aids, vaccines, over-the-counter medication and menstrual care products, might also be eligible for tax deductions.
- Some taxpayers can claim tax deductions for health insurance premiums that they pay.
What is a medical expense?
The IRS defines a medical expense as a payment for diagnosing, curing, alleviating or treating a disease, or “for treatments affecting any structure or function of the body.” To qualify for a deduction, a medical expense must be an out-of-pocket cost that is not covered by a health insurance policy, health savings account (HSA) or flexible spending account (FSA).
Eligible expenses might include:
- Copays: Flat fees you pay when seeing a doctor or filling a prescription
- Deductibles: The amounts you must pay each year for covered services before your health insurance starts to pay for them
- Coinsurance: The percentage you pay after you’ve reached your deductible
These expenses can be for you, your spouse and your dependents. Other expenses that might qualify include:
- Visits to a doctor, dentist or other medical practitioner
- Hospital or residential nursing home care
- Health-related weight loss programs
- Products that help with a physical disability
- Transportation for medical care
- Insurance premiums not covered by an employer
Currently, the IRS allows you to deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI). So if your AGI for the year is $50,000, your maximum out-of-pocket payment is $3,750 ($50,000 x .075). That means if your unreimbursed medical bills for the year added up to $8,000, you could deduct $4,250.
In preparation for filing taxes, it might be helpful to track information about your medical expenses throughout the year. This could include dates and services received, invoices, receipts and any communication with your health insurance or medical provider.
Minor medical expenses
Some medical expenses might seem small, but they can add up over the course of a year. Many of these expenses could be tax deductible, including:
- Contact lenses
- Hearing aids
- Service animals
- Taxi or bus fares to medical appointments
Major medical expenses
Many major medical expenses might also qualify for tax deductions, for example:
- Health insurance deductibles
- Hospital stays
- Smoking cessation programs
- Weight loss programs
- Inpatient treatment for alcohol or drug addiction
Home improvements made for medical reasons—like wheelchair accessibility—can qualify for tax deductions. Other home improvements that might be eligible are:
- Modification of bathrooms
- Installation of entrance and exit ramps
- Addition of handrails
- Lowering of cabinets
- Widening of doors
How to claim medical expenses on a tax return
To take advantage of tax deductions for medical expenses, it helps to be familiar with two ways the IRS lets you claim deductions on your federal tax return: standard and itemized deductions.
Standard vs. itemized deductions
A standard deduction reduces your taxable income by a specific dollar amount. For the 2023 tax year, the standard deduction for married couples who jointly file one return is $27,700. For single taxpayers and married individuals filing separately, the standard deduction is $13,850.
The IRS recommends itemizing if the dollar total of your eligible itemized deductions exceeds the standard deduction or if you can’t take a standard deduction. A taxpayer can benefit from itemized deductions if they rack up large unreimbursed medical or dental expenses during the tax year.
If you file a Form 1040 return, you must itemize deductions using what’s known as Schedule A.
HSAs and FSAs for medical expenses
If you don’t itemize deductions on your federal tax return, you still can score tax benefits by taking advantage of an HSA or FSA. Both accounts let you set aside money on a pretax basis to cover medical expenses.
HSAs and FSAs let you set aside untaxed money for copays, deductibles and coinsurance as well as prescription and over-the-counter medicine. Health insurance premiums usually can’t be paid for with HSA or FSA dollars.
You can contribute money to an HSA if you’re enrolled in a high-deductible health plan that only covers preventive services before you reach your deductible. On the other hand, you can open an FSA if you obtain health insurance through your employer.
Is health insurance tax deductible?
Some, but not all, health insurance premiums qualify for tax deductions.
When you itemize your deductions, you typically can claim a deduction for the money you pay out of pocket toward health insurance premiums—including traditional coverage, COBRA and Medicare. However, if your employer pays part of your health insurance premiums, that portion typically isn’t eligible for a tax deduction.
If you purchase health insurance through the federal Health Insurance Marketplace® or a state marketplace, you might qualify for a tax credit based on your income and household information. A tax credit gives you a dollar-for-dollar reduction of your final tax burden.
Self-employed health insurance tax deduction
An adjustment to income for health insurance premiums is available if you’re self-employed and buy coverage on your own, regardless of whether or not you itemize.
Most self-employed people can deduct premiums paid for health insurance, dental insurance and long-term care insurance that covers them, their spouse and/or their dependents. Deductions aren’t available if either a self-employed person or their spouse was eligible to enroll in an employer-sponsored health insurance plan.
How to save on medical expenses
To save money on medical expenses, it helps to understand what your health insurance does and doesn’t cover. You might also be able to cut health care costs by:
- Switching to generic drugs over brand-name drugs: A generic drug can cost anywhere from 30% to 85% less than its brand-name equivalent, according to the U.S. Food and Drug Administration.
- Ordering medicine by mail: Mail-order drugs can cost less than drugs you pick up at a pharmacy, often because mail-order drugs tend to come in discounted 90-day supplies.
- Taking advantage of routine health screenings: Screenings often don’t charge a copay and can detect health problems before they become worse—and more expensive to treat.
- Using discounts: Some health plans provide free or discounted products and services, such as gym memberships and eyewear.
- Avoiding the emergency room: Unless you’re dealing with a true emergency, it’s often more affordable to visit a provider or urgent care clinic for medical care.
- Seeking care from in-network providers: Because they have contracts with health insurers, in-network providers charge lower rates than out-of-network providers do.
Tax-deductible medical expenses in a nutshell
When tax season comes, it might be worth exploring whether any of your medical expenses qualify for tax deductions—especially if your itemized write-off is higher than the standard deduction for the year. Talking to an accountant or tax professional can help.
Taxes are tricky enough without having financial worries to boot. If your health care expenses are a source of stress, here are some tips for paying off medical bills.