When filing your California income tax return, knowing which medical expenses you can deduct on Schedule CA (540) is key to maximizing your deductions. California generally conforms to federal rules but comes with its own AGI threshold and adjustment rules. This guide explores what qualifies, how to report it, and important tips for claiming deductions.
1. California’s AGI Threshold for Medical Deductions
California applies the same 7.5% of federal adjusted gross income (AGI) threshold used federally. Only unreimbursed medical and dental expenses that exceed 7.5% of federal AGI may be deductible on Schedule CA, Part II :contentReference[oaicite:2]{index=2}.
2. Which Expenses Qualify?
California follows the IRS definition closely. Qualifying expenses include:
- Payments to medical professionals – doctors, dentists, surgeons, specialists
- Hospital and surgical costs
- Prescription medication and insulin
- Vision expenses like eyeglasses and contacts
- Hearing devices and batteries
- Long-term care services and insurance (to federal limits)
- Medical insurance premiums paid with after-tax dollars
- Transportation costs for medical care, such as mileage, parking, and tolls
- Medical equipment – wheelchairs, crutches, prosthetics
3. Unique California Adjustments
California law requires specific adjustments on Schedule CA. Two common items include:
- Self‑employed health insurance: If you deducted it federally, California treats it as a medical expense itemized on Schedule CA, line 1–4 :contentReference[oaicite:3]{index=3}.
- HSA distributions: Qualified medical expenses paid by a Health Savings Account (HSA) don’t reduce California AGI federally, so the excess must be added back on Schedule CA, line 4, column C :contentReference[oaicite:4]{index=4}.
4. Reporting Your Deduction on Schedule CA
- Complete your federal Schedule A and calculate your total medical expenses subject to the 7.5% federal AGI limit.
- Transfer that total to California’s Schedule CA, Part II, lines 1–4, Column A.
- Add or subtract California-only adjustments (e.g., self-employed insurance, HSA treatment) in Column C.
- Include the net result as part of your total itemized deductions on Form 540, line 18.
5. Important Things to Remember
- Only unreimbursed expenses paid within the tax year count.
- Expenses reimbursed by insurance, HSAs, or FSAs are excluded.
- Maintain clear documentation: receipts, EOBs, bank or credit statements, and mileage logs.
- Claim the standard deduction if your total itemized deductions don’t exceed it ($5,363 single; $10,726 married/joint for 2025).
6. Common Pitfalls to Avoid
- Including reimbursed expenses.
- Forgetting to reverse HSA-funded expenses on Schedule CA.
- Miscalculating the 7.5% threshold incorrectly on federal AGI.
- Failing to adjust for self-employed health insurance payments.
7. Example Breakdown
Scenario: AGI = $80,000; total unreimbursed medical expenses = $9,000
- Threshold = $6,000 (7.5% of AGI)
- Deductible = $3,000 on federal Schedule A
- California adjustment = Same $3,000—unless HSA or self‑employed insurance factors alter the amount.
8. Final Tips
- Keep all supporting documentation for at least 4 years in case of audit.
- Review Schedule CA instructions annually—laws can change.
- Consider tax software or a professional for accurate HSA and self-employed insurance treatment.
By understanding which medical expenses qualify and how to properly report them on Schedule CA, you can confidently claim deductions and potentially reduce your California tax liability. Diligence in documentation and accurate adjustments ensure your medical deductions are audit-proof and compliant.
