A practical guide for U.S. taxpayers on how to maximize medical expense deductions in 2025 by understanding the 7.5% AGI floor and eligible expenses.
Introduction
For 2025, the IRS continues to allow taxpayers to deduct qualified medical expenses that exceed 7.5% of adjusted gross income (AGI). This deduction can significantly reduce taxable income for individuals and families with high healthcare costs, but only if you itemize deductions on your tax return.
Understanding the 7.5% AGI Threshold
The medical expense deduction requires that only costs above 7.5% of your AGI are deductible. For example, if your AGI is $80,000, the first $6,000 of qualified medical expenses are not deductible. Any amount spent above that threshold may reduce your taxable income.
What Medical Expenses Count in 2025?
The IRS defines a wide range of deductible medical expenses. Below are common categories that count toward the 7.5% floor:
- Doctor and Hospital Bills: Payments to physicians, surgeons, dentists, and other licensed practitioners.
- Prescription Medications: Costs of prescribed drugs and insulin.
- Health Insurance Premiums: Including Medicare premiums, long-term care insurance (within limits), and COBRA coverage.
- Medical Equipment: Items such as wheelchairs, crutches, and CPAP machines.
- Dental & Vision: Exams, dentures, eyeglasses, contact lenses, and even LASIK surgery.
- Transportation: Mileage (22 cents per mile for 2025), bus fare, or taxi costs to receive medical care.
- Home Improvements: Modifications like ramps, grab bars, and widened doorways if medically necessary.
What Does Not Qualify?
Not every health-related expense is deductible. Some excluded items include:
- Cosmetic surgery (unless medically necessary).
- Over-the-counter medications and supplements (unless prescribed by a physician).
- General health club memberships and wellness vacations.
- Funeral expenses or non-medical insurance premiums.
Example Calculation
Maria has an AGI of $100,000 in 2025 and medical expenses totaling $15,000. The 7.5% floor equals $7,500. Maria can deduct $7,500 ($15,000 – $7,500) on Schedule A.
Strategies to Maximize the Deduction
- Bunch Expenses: Time elective surgeries or treatments in the same year to exceed the AGI floor.
- Track Mileage: Keep accurate records of all trips for medical purposes.
- Leverage Health Accounts: Use HSAs or FSAs in coordination with deductions for greater tax savings.
- Include Dependents: Deduct medical expenses paid for a spouse, children, or qualifying relatives.
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