As a CPA who works with small business owners and families, I often get questions about what qualifies as a medical expense. Because not every health-related expense qualifies for a tax deduction, and some expenses can only be claimed in certain situations, writing off medical expenses can be confusing. In today’s post, I’ll answer all of the common questions I hear about tax-deductible medical expenses.

What counts as a medical expense for tax purposes?

The IRS defines medical expenses as costs that are paid to diagnose, treat, prevent, or alleviate a physical or mental illness or medical condition.

Some common examples of medical expenses that qualify for tax purposes include:

• Doctor and specialist visits
• Hospital bills
• Prescription medications
• Dental treatment and cleanings
• Contact lenses and supplies
• Chiropractic sessions
• Mental health counseling
• Medical equipment like crutches, wheelchairs, and CPAP machines
• Health insurance premiums (sometimes)

Which medical expenses are not tax deductible?

Some taxpayers are surprised (and sometimes angry or saddened) to learn that some health-related costs aren’t tax deductible.

Examples of expenses that typically aren’t deductible include:

• Vitamins and supplements when taken for overall health and not prescribed by a physician
• Cosmetic surgery performed with the sole purpose of improving appearance
• Teeth whitening
• Gym memberships for general health
• Maternity clothes
• Funeral expenses
• Nonprescription items and over-the-counter medications, even if purchased at a pharmacy

One thing to keep in mind here is that while joining a gym to improve your overall health and fitness won’t qualify as a medical expense, if a doctor prescribes a specific exercise program to treat a medical condition, then some of those costs may qualify in certain situations. Make sure to ask a CPA if you’re not sure.

Can I deduct medical expenses if I take the standard deduction?

Here’s where the main confusion always comes in. If you take the standard deduction, then you can’t deduct medical expenses.

If you itemize your deductions, then you can deduct medical expenses on your Schedule A.

How much of my medical expenses can I deduct?

On top of only being able to deduct medical expenses if you itemize, even when you itemize, you can’t deduct all of your medical expenses.

This deduction is limited to the amount of qualifying medical expenses that exceeds 7.5% of your adjusted gross income (AGI).

Here’s an example with real numbers:

• AGI = $100,000
• 7.5% threshold = $7,500
• Total qualifying medical expenses = $12,000

In this situation, you would only be able to deduct $4,500 ($12,000 – $7,500).

As you can see from this example, taxpayers with moderate medical expenses won’t qualify for any significant tax benefit by itemizing and deducting medical expenses. However, if you’ve had a year with unusually high healthcare costs (sorry to hear that), you should run the numbers to see if you’ll benefit from taking the deduction.

Can you deduct medical expenses paid with an HSA?

No, you can’t deduct medical expenses that you paid for using your Health Savings Account (HSA) because you already used tax-free HSA money to pay for the expense and the IRS doesn’t allow double tax benefits.

Also, just a heads up that the same principle applies if your employer reimburses your expense through certain tax-free benefit programs they offer.

What medical expenses can be paid from an HSA?

One important thing to keep in mind is that while you may not be able to deduct your medical expenses from your annual tax return, you can use HSA funds and other pre-tax reimbursement benefits from your employer to lessen your tax burden.

In addition, some expenses that don’t qualify for medical expense deductions can be paid for with HSAs. Common examples of this are over-the-counter medications and feminine hygiene products.

If you’re not sure if a purchase can be paid for or reimbursed with an HSA, it’s a good idea to keep your receipts and review IRS guidance before doing so.

Are health insurance premiums tax deductible?

This is a complicated question because the answer depends on your situation.

Employees who have health insurance premiums deducted from their paycheck on a pre-tax basis are already receiving a tax benefit, so those premiums can’t be deducted again.

Self-employed people may qualify for the Self-Employed Health Insurance Deduction, which allows you to receive a tax benefit from your health insurance costs even if you don’t itemize your deductions. This deduction reduces your AGI, which in turn lowers your income tax bill.

There are a few conditions for taking the deduction for self-employed health insurance:

• It can be used on a monthly basis, so you can qualify for it in some months and not others, but you can’t claim this deduction in months where you or your spouse are eligible to participate in an employer’s health plan.
• Also, the deduction can’t be more than your earned income from your business.

Can I deduct my mileage to and from medical appointments?

Yes, your travel expenses that are related to essential medical care may be deductible. You can use the medical mileage rate set by the IRS to calculate your costs or you can calculate your actual out-of-pocket expenses.

If you’re going to deduct your travel expenses for medical care, make sure you keep records that show the date, destination, purpose, and number of miles driven.

Abridged by Amy

Clients commonly misunderstand medical expense deductions because many people assume that every medical expense automatically creates a tax deduction. The important things to remember are:

• The expense must qualify under IRS rules.
• You’ll have to itemize your deductions in order to deduct medical expenses.
• Only medical expenses over 7.5% of your AGI are deductible.
• Expenses paid with HSA funds aren’t deductible.

The reality for most people is that an HSA often provides a greater tax benefit than deducting medical expenses because HSA contributions can be tax-deductible, the money grows tax-free, and qualified withdrawals are tax-free.

If you’re not sure how to maximize your tax benefits, it’s worth reviewing your situation with a CPA. A few minutes of planning can help you avoid costly mistakes and ensure that you’re not missing out on any available tax-saving strategies.