As healthcare costs continue to rise, understanding what medical expenses qualify for tax deductions can make a significant difference in your annual tax return. The IRS allows individuals to deduct qualified medical expenses that exceed a certain percentage of their adjusted gross income (AGI), provided they itemize deductions on their tax return using Schedule A (Form 1040).
This guide outlines the rules for the 2025 tax year, explaining what qualifies as deductible medical expenses, the AGI threshold, and how taxpayers—especially those with high medical bills—can benefit from proper tax planning.
Understanding the AGI Threshold in 2025
For 2025, you can deduct unreimbursed medical expenses that exceed 7.5% of your AGI. This threshold remains unchanged from previous years. If your total qualified medical expenses are less than this amount, you won’t be able to claim a deduction for them.
Example: If your AGI is $80,000, only the portion of your unreimbursed medical expenses that exceeds $6,000 (7.5% of $80,000) is deductible.
What Medical Expenses Are Deductible?
The IRS provides a comprehensive list of qualified medical expenses that can be claimed as deductions. In 2025, deductible items generally include:
- Payments to doctors, surgeons, dentists, psychologists, and other medical practitioners
- Hospital services, including nursing services
- Prescription medications and insulin
- Medical aids such as eyeglasses, contact lenses, hearing aids, and wheelchairs
- Long-term care services and insurance premiums (within IRS limits)
- Transportation for essential medical care (mileage, parking, tolls)
- Smoking cessation programs and certain weight-loss programs (if prescribed)
- Mental health services, including therapy and psychiatric care
It’s important to maintain records of all your expenses, including receipts, prescriptions, and proof of medical necessity if applicable.
Expenses That Do Not Qualify
Not all health-related expenditures are deductible. The following are commonly confused with deductible expenses but do not qualify:
- Over-the-counter medicines (except insulin)
- Cosmetic surgery (unless medically necessary)
- Health club memberships or spa treatments
- General health items like vitamins, toothpaste, or dietary supplements
- Funeral or burial expenses
Claiming the Deduction
To claim your medical expense deduction:
- Itemize your deductions using Schedule A on Form 1040
- Total all qualified unreimbursed medical expenses for the year
- Calculate 7.5% of your AGI
- Subtract that figure from your total medical expenses to find the deductible portion
- Include the deductible amount on Schedule A
If your standard deduction is higher than your itemized deductions, you may not benefit from claiming medical expenses. Work with a tax professional to determine the best option for your situation.
Special Considerations for Seniors and Disabled Individuals
Seniors often face higher medical expenses and may benefit more from this deduction. Additionally, certain expenses related to long-term care, nursing homes, and home modifications for medical purposes may be deductible if medically necessary and prescribed by a healthcare provider.
Those with disabilities may also claim costs associated with accessibility improvements, service animals, and adaptive technologies.
How PEAK Business Consultancy Services Can Help
PEAK Business Consultancy Services offers tax preparation and compliance support to CPA firms and individual taxpayers across the United States. Based in India, our team of experienced tax professionals has extensive experience working with U.S. CPAs on complex tax matters, including itemized deductions, medical expense audits, and documentation.
If you’re a U.S. CPA looking to outsource tax return preparation, PEAK BCS is your reliable partner. We offer full-cycle support from data entry to final review for 1040s, 1065s, 1120s, and 1120S returns. Learn more about our tax outsourcing services here.
Tips to Maximize Your Medical Deductions
- Bundle expenses in one year to exceed the 7.5% threshold (e.g., schedule elective surgeries in the same tax year)
- Use a Health Savings Account (HSA) or Flexible Spending Account (FSA) for eligible expenses
- Keep detailed records, including mileage logs for medical travel
- Consult with a tax professional if your medical situation changes dramatically mid-year
IRS Publication 502
For an authoritative source, refer to IRS Publication 502 – Medical and Dental Expenses, which offers comprehensive guidance on eligible deductions for 2025. However, due to changes in IRS policy and inflation adjustments, always verify thresholds and limits annually.
Conclusion
Medical expense deductions can provide valuable tax relief if your healthcare spending is substantial. With the 7.5% AGI threshold in place, careful planning and documentation are essential to ensure you qualify.
Whether you’re managing your own tax return or advising clients, working with experts can help ensure compliance and accuracy. PEAK Business Consultancy Services is here to support CPA firms with high-volume tax filing needs and individual taxpayers with precision and expertise. Partner with PEAK BCS today for seamless tax support.
