Medical expenses can add up quickly, especially for individuals and families managing ongoing healthcare needs. What many taxpayers don’t realize is that some of these costs may be deductible—if they meet specific IRS requirements.

In this week’s Tax Tip Tuesday, we’re breaking down how to deduct unreimbursed medical expenses, how the 7.5% of Adjusted Gross Income (AGI) threshold works, and how to determine whether itemizing your deductions makes sense.

Understanding these rules can help you take advantage of deductions you may otherwise overlook.

What Are Unreimbursed Medical Expenses?

Unreimbursed medical expenses are healthcare-related costs that you pay out of pocket and are not covered by insurance or reimbursed through other programs such as an HSA or FSA.

Common examples include:

• Doctor visits and hospital services
• Prescription medications
• Dental and orthodontic care
• Vision care (glasses, contacts, exams)
• Certain medical equipment and supplies

To qualify, these expenses must be considered medically necessary and not cosmetic in nature.

For a full list of qualifying expenses, refer to IRS guidance in Publication 502 (Medical and Dental Expenses).

Understanding the 7.5% AGI Threshold

The IRS allows you to deduct unreimbursed medical expenses only to the extent that they exceed 7.5% of your Adjusted Gross Income (AGI).

How It Works

If your AGI is $100,000:

• 7.5% of AGI = $7,500
• Only medical expenses above $7,500 are deductible

So, if you have $10,000 in qualified medical expenses:

• Deductible portion = $2,500

You can review how AGI is calculated directly on the IRS website under Form 1040 instructions.

When Does This Deduction Make Sense?

The unreimbursed medical expenses deduction is only available if you itemize deductions rather than take the standard deduction.

You may benefit from itemizing if:

• You have significant medical expenses in a given year
• You have other itemized deductions (mortgage interest, state taxes, etc.)
• Your total itemized deductions exceed the standard deduction

 If you’re unsure whether itemizing is beneficial, review our related guide on Head of Household Filing Status and Deduction Strategies.

What Expenses Do NOT Qualify?

Not all healthcare-related costs are deductible.

Non-qualifying expenses generally include:

• Cosmetic procedures
• Expenses reimbursed by insurance or employer plans
• General wellness items not tied to medical care
• Expenses already paid using pre-tax accounts

 Learn more about how pre-tax accounts interact with deductions in our posts on:

• Health Savings Accounts (HSA) tax benefits
• Flexible Spending Accounts (FSA) strategies

How to Track and Document Medical Expenses

Accurate recordkeeping is essential when claiming unreimbursed medical expenses.

Best practices include:

• Saving receipts and invoices
• Keeping Explanation of Benefits (EOB) statements
• Tracking mileage for medical visits
• Maintaining a categorized expense log

The IRS recommends keeping documentation for all deductible expenses in case of audit review.

How This Deduction Fits Into Your Tax Strategy

The unreimbursed medical expense deduction should be evaluated alongside other tax planning strategies.

It often works best when combined with:

• Timing medical procedures within a single tax year
• Coordinating with HSA or FSA usage
• Reviewing overall itemized deductions

Strategic planning can help ensure you exceed the 7.5% AGI threshold and maximize your benefit.

Key Takeaways: Deducting Medical Expenses

• Only unreimbursed medical expenses qualify
• You can deduct expenses exceeding 7.5% of AGI
• You must itemize deductions to benefit
• Expenses paid with HSA or FSA funds are not deductible
• Strategic timing can significantly increase savings

Need Help Determining Your Deduction?

Medical expense deductions can become complex—especially when combined with other tax strategies and reimbursement programs.

Cheshier Tax Resolution works with individuals and families to evaluate eligibility, ensure compliance, and identify opportunities to maximize tax savings.

FAQs

What are unreimbursed medical expenses?

Unreimbursed medical expenses are healthcare costs you pay out of pocket that are not covered by insurance or reimbursed through other programs.

How does the 7.5% AGI rule work?

You can only deduct medical expenses that exceed 7.5% of your Adjusted Gross Income (AGI).

Do I have to itemize to deduct medical expenses?

Yes, you must itemize deductions to claim unreimbursed medical expenses.

Can I deduct expenses paid with an HSA or FSA?

No, expenses paid with pre-tax dollars through an HSA or FSA cannot also be deducted.

What medical expenses qualify?

Qualified expenses include doctor visits, prescriptions, dental care, and vision services, as outlined by IRS guidelines.

Is this deduction worth tracking every year?

Yes—especially during years with high medical costs, when exceeding the 7.5% AGI threshold is more likely.

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