Moving between states, working in one and living in another, or retiring partway through the year are common reasons people file tax returns in more than one state. But what does this mean for medical expense deductions? Given that state tax laws vary widely—some conforming closely to federal rules, others not at all—it’s crucial to understand how these deductions work when you’re dealing with multi-state taxation. This blog explains how medical expense deductions are treated across state lines and how to optimize your filings when income or residency spans more than one state in a tax year.
🌍 Why You Might File in Two States
Filing in two states usually occurs due to one of the following circumstances:
- You moved to a new state during the tax year (part-year resident in both states)
- You lived in one state but earned income in another (non-resident income tax return)
- You own property or operate a business in another state
- You split time between two residences (e.g., snowbirds, digital nomads, retirees)
When filing in two states, each return typically accounts only for income earned while residing in or sourced from that specific state. However, deductions such as medical expenses are not always portable and must conform to each state’s specific tax rules.
🏥 Medical Deductions at the Federal Level
At the federal level, you can deduct qualified medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI), but only if you itemize deductions on Schedule A of Form 1040. These include:
- Doctor and hospital bills
- Prescription drugs
- Health insurance premiums (in some cases)
- Long-term care services
- Medically necessary travel
Federal deductions are not prorated by state. You take them once, on your federal return, regardless of how many states you lived in.
🏛️ State-Level Medical Deduction Rules Vary Widely
Each state decides how it treats medical deductions. Here are the most common approaches:
- Full Conformity: States like Arizona and California allow medical expense deductions following the 7.5% AGI federal threshold.
- Partial Conformity: States like Nebraska allow medical deductions with different AGI thresholds (e.g., 4% instead of 7.5%).
- No Deduction Allowed: States like Illinois, Pennsylvania, and Indiana do not allow any itemized deductions, including medical expenses.
- No State Income Tax: States like Florida, Texas, and Washington don’t tax income at all, so there’s no deduction needed.
📄 Filing as a Part-Year Resident: Medical Deductions
If you moved from one state to another during the year, you will likely file as a part-year resident in both states. Here’s how medical deductions usually work in this case:
- Federal Return: You deduct your total annual medical expenses that exceed 7.5% of your total AGI.
- State Returns: Each state will allow (or disallow) the medical deduction based on its own rules and typically only for the period you were a resident there.
For example, if you lived in New York (which allows deductions on Form IT-196) for half the year and then moved to Pennsylvania (which allows none), you might only be able to claim part of your medical expenses on the New York return.
📊 Example Scenario
Let’s say Jane moved from California to Nevada in July 2025. She incurred $12,000 in qualifying medical expenses during the year, and her AGI was $100,000.
- Federal Return: Jane itemizes and deducts $4,500 ($12,000 – 7.5% of $100,000)
- California Return: California allows the same 7.5% AGI threshold. Jane may allocate a prorated portion of the $12,000 (e.g., $6,000) based on her CA residency period.
- Nevada Return: No personal income tax, so no state deduction applies.
💬 Frequently Asked Questions
Do I have to split my medical expenses between two states?
It depends. Some states allow you to claim expenses only for the portion incurred while you were a resident. Others allow a full-year deduction if you meet AGI thresholds and their itemization rules.
Can I claim medical expenses on both state returns?
Usually, no. If both states allow itemized deductions, you may be limited to only the portion of expenses that relate to your time in that state. Double-dipping is not allowed.
Do medical deductions apply to nonresident income tax returns?
No. Nonresident returns usually tax only income earned in that state and do not permit itemized deductions like medical expenses. These deductions are generally reserved for full or part-year residents.
🧾 Tips to Maximize Medical Deductions Across States
- Track Expenses by Date and State: Especially important if you move mid-year or travel for healthcare across borders.
- Use the Higher-Deduction State Strategically: If one state offers better deduction rules, time your major medical payments accordingly (e.g., before you move).
- Don’t Forget Federal Benefits: You can still fully deduct medical expenses at the federal level even if neither state allows it.
- Consult With a Tax Professional: Especially for complex returns involving high medical costs and dual residency.
📋 Summary Comparison Table
| Scenario | Federal | State A (e.g., NY) | State B (e.g., FL) |
|---|---|---|---|
| Medical Expense Deductibility | Yes (7.5% AGI threshold) | Yes (if itemizing) | No (no income tax) |
| Prorated by Residency | No | Yes | N/A |
| Itemization Required? | Yes | Yes | N/A |
🔚 Final Thoughts
When filing in two states, medical expense deductions can get complicated. Your federal return remains your best opportunity to deduct the full range of medical expenses. However, state rules vary significantly, and being proactive can help ensure you don’t lose out on available deductions. If you’re planning a move or split residency, it’s wise to review each state’s tax treatment of medical expenses and time your payments strategically. Accurate record-keeping and professional advice are key to optimizing your tax situation across state lines.
