When preparing your tax return, understanding how health-related expenses are treated at both the federal and state level can be the key to unlocking significant tax savings. For residents of New York, the rules concerning deductible medical expenses closely align with federal guidelines, but with a few nuanced differences. This blog provides a comprehensive comparison of federal and New York State rules on deductible health costs, helping taxpayers maximize their deductions and avoid common pitfalls in 2025.
Overview: Why This Comparison Matters
Many taxpayers are aware of medical expense deductions on their federal return, especially when itemizing deductions using Schedule A. However, state returns like those filed in New York often present a different landscape. While New York does generally conform to federal definitions, understanding how the deductions are calculated and applied separately is essential for accurate tax reporting and planning.
1. Federal Medical Expense Deductions: The Basics
At the federal level, the IRS allows taxpayers to deduct qualified, unreimbursed medical and dental expenses that exceed 7.5% of their Adjusted Gross Income (AGI). These deductions are claimed using Schedule A of Form 1040, which must be filed when choosing to itemize rather than take the standard deduction.
Qualifying expenses under IRS guidelines include:
- Payments to doctors, dentists, surgeons, chiropractors, and psychologists
- Hospital services, surgeries, and diagnostic testing
- Prescription medications and insulin
- Medical equipment (e.g., wheelchairs, prosthetics)
- Long-term care services and insurance premiums (subject to limits)
- Vision and dental care (e.g., glasses, orthodontics)
- Transportation expenses for medical care (mileage, parking, tolls)
Only the portion of these expenses that exceeds 7.5% of your federal AGI is deductible. Expenses reimbursed by insurance, FSAs, or HSAs are not deductible.
2. New York State Medical Expense Deductions: What’s Different?
New York generally follows the federal guidelines for defining what qualifies as a deductible medical expense. However, New York has some unique requirements:
- You must itemize your deductions on your federal return in order to itemize on your New York return using Form IT-196.
- New York does not allow itemized deductions if you claimed the federal standard deduction.
- New York applies the same 7.5% AGI threshold for deducting medical expenses.
- The deduction is claimed on Form IT-196, Line 1, which reflects the same amount from federal Schedule A, Line 4.
3. Side-by-Side Comparison Table
| Criteria | Federal (IRS) | New York State |
|---|---|---|
| Minimum AGI Threshold | 7.5% of federal AGI | 7.5% of federal AGI |
| Form Used | Schedule A (Form 1040) | Form IT-196 |
| Qualifying Expenses | Defined in IRS Publication 502 | Same as federal |
| Standard Deduction Option | Available if itemizing is not beneficial | Must itemize federally to itemize in NY |
| HSA and FSA Reimbursements | Disqualify expenses from deduction | Same rule applies |
| Transportation Costs | Deductible if for medical purposes | Conforms to federal rule |
4. Common Examples of Deductible Expenses for Both Returns
These expenses are deductible under both federal and New York State rules when unreimbursed:
- Health insurance premiums paid with after-tax dollars
- Dental and vision services
- Hearing aids and batteries
- Medically necessary home improvements (e.g., wheelchair ramps)
- In-patient mental health treatment
- Nursing home care primarily for medical reasons
- Out-of-pocket copays, coinsurance, and deductibles
5. Documentation and Recordkeeping
Both the IRS and New York State require thorough documentation for all claimed medical expenses. You should retain:
- Receipts and invoices from healthcare providers
- Explanation of Benefits (EOBs) from insurance companies
- Prescription orders and medical recommendations
- Mileage logs for transportation expenses
- Proof of payment (checks, credit card statements, etc.)
These documents are crucial in case of an audit and serve as proof that the expenses were legitimate and not reimbursed.
6. Tips to Maximize Deductions Across Both Returns
- Bunch expenses: Schedule elective procedures and recurring medical costs in the same year to surpass the 7.5% threshold.
- Track travel: Deduct mileage to and from medical appointments at the IRS standard rate (e.g., 22 cents per mile for 2025, subject to change).
- Avoid duplication: Never deduct expenses that were reimbursed or paid through tax-advantaged accounts.
- Don’t forget insurance premiums: If not paid through pre-tax payroll, these may count.
- Consider tax software: Tools like TurboTax and TaxSlayer help track and align federal and state deductions correctly.
7. When Not to Itemize
If your total deductions (medical, mortgage interest, property taxes, etc.) do not exceed the standard deduction amount, you should not itemize. For 2025, New York’s standard deduction amounts are:
- Single: $8,000
- Married Filing Jointly: $16,050
- Head of Household: $11,200
Itemizing only makes sense if your deductions exceed these thresholds on both the federal and New York return.
8. Final Thoughts
While New York generally mirrors federal medical deduction rules, the key difference lies in the requirement that you must itemize on your federal return to take advantage of medical deductions on your state return. Understanding these rules and preparing early can help you optimize your healthcare-related tax strategy. Keep track of your eligible medical expenses throughout the year and consult a tax professional if you’re uncertain about how to apply the rules to your specific situation.
By understanding both federal and New York rules on deductible health costs, taxpayers can avoid leaving valuable deductions on the table and reduce their taxable income legitimately and efficiently.
