If you’re an Arizona resident with significant unreimbursed medical costs, the state’s uniquely generous tax rules offer a major opportunity. Unlike federal tax returns, which limit you to deducting only the amount above 7.5% of your AGI, Arizona allows you to deduct 100% of qualifying medical expenses—no AGI threshold required. This guide shows how to strategically maximize those deductions on your Arizona return in 2025.
✅ Why Arizona’s Rule Is So Valuable
Arizona Revised Statutes § 43-1042(B) enables you to deduct your full amount of unreimbursed, after-tax medical expenses—without reducing them by any portion of your AGI. Even if you take the federal standard deduction, you can still itemize in Arizona just to claim the medical write-off.
Key takeaway: Every dollar you spend out-of-pocket on medical care can directly lower your Arizona taxable income—no threshold, no limits.
💡 Qualifying Medical Expenses
Arizona’s definition aligns with the IRS, including:
- Doctor, dentist, surgeon, and specialist fees
- Hospital stays, inpatient and outpatient procedures
- Prescription drugs and insulin
- Vision care: exams, eyeglasses, contacts
- Hearing aids and assistive devices
- Medical equipment: wheelchairs, prosthetics, oxygen
- Long-term care services and medically necessary premiums
- Transportation for medical care—mileage, tolls, parking
Remember: Expenses reimbursed or pre-paid via HSAs, FSAs, insurance, or employer plans don’t qualify.
🧮 How to Maximize Deductions
- Track all eligible expenses: Maintain a log of dates, providers, and payment proof.
- Bunch year-end expenses: Prepay December medical bills or elective procedures to claim them in the same tax year.
- Include travel details: Record miles, parking, and tolls for medical appointments for full deduction.
- Separate reimbursed vs. unreimbursed: Make sure only out-of-pocket costs are included in your Schedule A totals.
- Claim even if federal standard-deduction: You can itemize on Arizona’s Schedule A solely for medical write-offs.
📄 Filing Steps on Your Arizona Return
- Collect all qualifying medical receipts and payments for the year.
- On Arizona Form 140 Schedule A, list the total unreimbursed medical expenses on lines 1–4—no AGI adjustment needed.
- Transfer the total from Schedule A to Form 140, line 43, as part of your itemized deductions.
- Complete the rest of Schedule A (mortgage interest, property taxes, charitable donations, etc.) if applicable.
- Submit Form 140 with Schedule A attached.
🌟 Example Scenario
You had $7,500 in unreimbursed medical costs in 2025 and take the federal standard deduction. On Arizona Schedule A, you enter the full $7,500 under medical expenses. As a result, your taxable state income is reduced by that full amount—without any AGI reduction.
Contrast that with federal deductions, where only expenses above 7.5% of AGI (e.g., $6,000 threshold) are deductible.
🛡 Documentation Tips
Solid recordkeeping helps if you’re ever audited:
- Keep detailed invoices from providers
- Retain proof of payment
- Save insurance EOBs showing unreimbursed balances
- Log mileage and parking/toll details for medical travel
- Exclude any reimbursement or HSA/FSA payments
🔄 Federal vs. Arizona Comparison
| Feature | Federal Tax | Arizona Tax |
|---|---|---|
| AGI Threshold | 7.5% of AGI (only excess deductible) | No threshold—deduct full amount |
| Itemize Requirement | Must itemize federally to deduct | Can itemize in Arizona even if federal standard |
| Reimbursements | Only unreimbursed, after-tax expenses count | Same restriction applies |
🏁 Final Thoughts
Arizona’s full medical expense write-off is a rare and valuable benefit—especially for individuals and families with significant healthcare costs. By itemizing on your state return, tracking meticulously, and planning your expenses, you can reduce your taxable income dollar-for-dollar in 2025. Take advantage of Arizona’s tools even if you can’t itemize federally, and reap the full benefit of your medical spending.
If you’re unsure how to optimize deductions or need help documenting your claims, consider consulting a tax professional familiar with Arizona state tax rules.
