Your insurance company got paid. Your dentist got paid. Your pharmacy definitely got paid. Meanwhile, you’re looking at your bank account wondering why trying to stay healthy is so ridiculously expensive.
But at least some of these bills may do you a favor by lowering your taxable income. Don’t celebrate yet, though, because spending a small fortune on medical care isn’t enough. You also have to play by the IRS’s rules.
When medical expenses become deductible
The IRS lets you deduct certain unreimbursed medical expenses if you itemize deductions. While that sounds great in theory, only the portion of your expenses that exceeds 7.5% of your adjusted gross income (AGI) is deductible.
So, if your AGI is $80,000, you’d need to spend more than $6,000 on eligible medical expenses before you could deduct a penny. If you had $10,000 in expenses, you could potentially deduct $4,000.
Before you start mentally spending that $4,000, remember that a deduction reduces your taxable income, not your tax bill dollar for dollar. And unless your total itemized deductions beat the standard deduction, all that receipt collecting might not save you any money at all.
Don’t forget about these expenses
Health insurance premiums paid with after-tax dollars may qualify, along with hospital bills and prescriptions. But the IRS doesn’t stop there. Some of the expenses you barely think twice about could count, too.
- Dental work: Fillings, crowns, braces, and other necessary procedures.
- Vision care: Prescription eyeglasses, contacts, eye exams, and qualifying corrective surgery.
- Transportation: Mileage, parking, and tolls for eligible medical trips
- Medical equipment: Hearing aids, wheelchairs, and other qualifying medical supplies.
- Long-term care: Qualified services, plus premiums for qualified long-term care insurance, subject to age-based annual limits.
So it turns out the expensive bifocals the optometrist insisted you needed might actually work in your favor at tax time.
But before you start adding every receipt to a spreadsheet, there are also some expenses that don’t make the cut.
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Not everything for your health gets a tax break
Your gym membership? You’ll get flatter abs, but it’s usually not deductible. Your daily multivitamin? Probably not. And the cosmetic teeth whitening? You can’t write that one off, either.
Usually, expenses that are meant to improve your appearance or overall wellness don’t qualify. Cosmetic procedures are typically excluded, too, although certain surgeries to correct certain birth defects, accident-related injuries, or disfigurement from disease may qualify.
And don’t even think about double-dipping. If insurance reimbursed you or you paid with tax-free HSA or FSA funds, you can’t deduct those expenses again. The same goes for premiums you’ve already deducted elsewhere. The IRS is many things, but generous enough to let you deduct the same thing twice is not one of them.
What about those other health insurance tax breaks?
The medical expense deduction isn’t your only opportunity to save. Depending on your situation, you might qualify for other health insurance tax credits or deductions, including:
- Marketplace premium tax credits help eligible households pay for Marketplace health insurance.
- The self-employed health insurance deduction lets qualifying self-employed taxpayers deduct eligible premiums without itemizing.
- HSAs and FSAs offer tax advantages for eligible healthcare expenses.
Before filing, round up those medical receipts and see whether your expenses clear the 7.5% threshold. A deduction isn’t guaranteed, but it’s worth doing the math. The IRS can’t undo the trauma of your last root canal, but it may be able to offer you a little tax relief.
