Taxpayers facing substantial out-of-pocket healthcare costs often turn to medical expense deductions to alleviate some of the financial burden. While the federal tax code offers an itemized deduction for qualified medical expenses that exceed a specific percentage of adjusted gross income (AGI), California’s tax laws have their own version of the rule — and it’s not identical. In this comprehensive blog, we will explore how California’s medical expense deduction rules differ from federal rules in 2025 and what taxpayers need to know to maximize their deductions at both levels.
Federal Medical Expense Deduction Rules in 2025
For 2025, the IRS allows taxpayers to deduct unreimbursed medical and dental expenses that exceed 7.5% of their AGI, provided they itemize deductions on Schedule A of Form 1040. This deduction is available to all taxpayers regardless of age and covers a wide array of qualified medical expenses such as surgeries, prescription drugs, dental work, vision care, insurance premiums (in some cases), and mileage for travel related to medical appointments.
Example: If your AGI is $80,000, you must have more than $6,000 in unreimbursed qualifying medical expenses before you can start deducting. If your expenses total $10,000, only $4,000 is deductible on your federal return.
California Medical Expense Deduction: Key Differences
While California does conform to many federal tax rules, it applies different criteria when it comes to medical expense deductions. Here are the key ways in which California’s rules differ from federal regulations in 2025:
1. Higher AGI Threshold: 10% vs. 7.5%
The most significant difference is the AGI threshold. California uses a 10% AGI threshold for medical expense deductions instead of the federal 7.5%. This means that a larger portion of your medical expenses must be incurred before any deduction is allowed on your California state income tax return.
Example: If your AGI is $80,000, the California threshold is $8,000 (10% of AGI) versus the federal threshold of $6,000 (7.5%). If you have $10,000 in qualifying medical expenses:
- Federal deduction: $4,000 ($10,000 – $6,000)
- California deduction: $2,000 ($10,000 – $8,000)
This difference results in a smaller deductible amount on your California return.
2. Based on Federal AGI, Not State AGI
California applies the 10% threshold to your federal AGI, not your California AGI. This is important because California income may differ due to state-specific adjustments like the disallowance of certain federal deductions or the addition of nontaxable municipal bond interest.
3. No Special Allowances for Seniors or Disabled Individuals
At the federal level in previous years, there was a higher threshold of 10% for taxpayers under age 65, and 7.5% for those over 65. Now that the federal threshold is 7.5% for everyone, California’s uniform 10% threshold stands out. The state does not offer a lower threshold for seniors or disabled individuals — all taxpayers are subject to the 10% rule.
4. Same Definition of Qualified Medical Expenses
Despite the differences in threshold, California largely conforms to the IRS’s definition of qualified medical expenses. This means expenses deductible on the federal return — if not reimbursed or paid with pre-tax dollars — generally qualify for deduction on the California return as well.
These include:
- Payments to doctors, dentists, surgeons, and other medical practitioners
- Hospital and nursing home costs (for medical care)
- Prescription medications and insulin
- Health insurance premiums (if not paid pre-tax or deducted elsewhere)
- Long-term care services and premiums
- Transportation for medical care, including mileage, parking, and tolls
Expenses not covered include cosmetic procedures, non-prescription drugs (unless insulin), general health club memberships, and elective wellness items.
Where to Claim the Deduction on California Tax Forms
To claim a medical expense deduction in California, you must itemize deductions using Schedule CA (540) and complete the California adjustments section. Itemized deductions are then reported on Form 540, Line 18.
The process involves:
- Calculating total medical expenses
- Applying the 10% federal AGI threshold
- Entering the resulting amount as part of your total itemized deductions
- Subtracting state adjustments (if any)
If your total itemized deductions are less than the California standard deduction ($5,363 for single filers and $10,726 for married filing jointly in 2025), you should claim the standard deduction instead.
Can You Deduct the Same Medical Expenses on Both Returns?
Yes — as long as you itemize deductions on both your federal and California returns and meet each AGI threshold. However, because California’s threshold is higher, you might qualify for the federal deduction but not for the state deduction.
Important: If you use pre-tax funds (e.g., through an HSA or FSA) to pay for a medical expense, it is not deductible on either return. Only expenses paid out-of-pocket with after-tax dollars qualify.
When to Itemize vs. Take the Standard Deduction in California
Itemizing makes sense if your total deductions (including medical expenses, mortgage interest, property taxes, and charitable contributions) exceed the California standard deduction. Because of California’s higher medical deduction threshold and lower standard deduction amounts compared to federal, more taxpayers may find itemizing beneficial on their state return, especially if they own a home or have large out-of-pocket health costs.
Tips for Maximizing Your California Medical Deduction
- Bunch expenses into one year: Schedule elective procedures, dental work, and vision care in the same year to exceed the 10% threshold.
- Track every eligible cost: Include co-pays, lab fees, travel mileage, and over-the-counter medicines (only if prescribed).
- Save documentation: Keep receipts, invoices, and proof of payment for all expenses. Also save insurance explanations of benefits (EOBs).
- Consider out-of-pocket payment: When close to the threshold, paying with after-tax dollars rather than using HSA funds could allow you to claim the deduction.
- Evaluate each year: If you don’t exceed the threshold one year, you might plan and shift expenses into the next year for a better tax result.
California vs. Federal Medical Deduction: Side-by-Side Comparison
| Criteria | Federal | California |
|---|---|---|
| AGI Threshold | 7.5% of AGI | 10% of Federal AGI |
| Eligible Taxpayers | All who itemize | All who itemize |
| Senior Discount | No (as of 2025) | No |
| Qualifying Expenses | IRS Pub 502 list | Follows federal list |
| Form Used | Schedule A (Form 1040) | Schedule CA (540) |
Conclusion: Plan Smart to Make the Most of California’s Deduction Rules
California’s medical expense deduction rules are more restrictive than federal rules due to the higher AGI threshold. However, if your unreimbursed medical costs are high, or if you can strategically bunch expenses into a single year, you may still benefit. Knowing the differences — especially the 10% AGI rule — allows you to plan ahead, choose whether to itemize, and track every dollar that could make the difference between a taxable year and a tax-saving one.
Always keep organized records, evaluate your eligibility annually, and consider consulting a tax advisor to maximize your benefits on both federal and California returns.
