Special Deductions: Medical Expenses, Charitable Contributions, and More for Seniors (2025 Tax Guide)

The Most Powerful Deduction for Seniors: Medical Expenses

For most retirees, healthcare costs are a significant and growing part of their budget. The medical expense deduction is the number one reason why seniors may benefit from itemizing. It allows you to deduct qualifying medical expenses that are not covered by insurance.

Understanding the 7.5% AGI Hurdle

You can only deduct the amount of medical expenses that is more than 7.5% of your Adjusted Gross Income (AGI). Your AGI is your gross income minus certain “above-the-line” deductions.

Example: If your AGI is $50,000, the 7.5% threshold is $3,750. If you had $8,000 in qualifying medical expenses, you could deduct $4,250 ($8,000 – $3,750).

A Checklist of Deductible Medical Costs

The list of qualifying expenses is broader than many people realize. It includes:

• Insurance Premiums: This is a big one. It includes premiums for Medicare Parts B and D, Medicare Advantage plans, Medigap policies, and qualified long-term care insurance (up to age-based limits).
• Out-of-Pocket Payments: Co-pays, deductibles, and payments for doctor visits, hospital stays, and dental work (including dentures).
• Prescription Drugs and insulin.
• Vision and Hearing: The cost of eyeglasses, contact lenses, and hearing aids.
• Transportation: The cost of travel (mileage, bus fare, ambulance services) primarily for medical care.
• Long-Term Care Services: Costs for qualified long-term care services for a chronically ill individual.

Giving Back and Getting Back: Charitable Contributions

If you are charitably inclined, your generosity can lead to a significant tax deduction. You can deduct contributions made in cash or property to qualified organizations.

Deducting Cash and Property

You can deduct cash contributions, as well as the fair market value of donated goods like clothing or furniture to organizations like Goodwill. Meticulous record-keeping is key; always get a receipt or keep a bank record for any donation.

A Better Way for IRA Owners: Qualified Charitable Distributions (QCDs)

For seniors age 70½ and older, a QCD is a far superior strategy. It allows you to donate up to $105,000 (for 2024, indexed for inflation) directly from your Traditional IRA to a charity. The benefits are huge:

• The distribution is not included in your taxable income at all.
• It counts towards your Required Minimum Distribution (RMD) for the year.
• Because it lowers your AGI, it can also help reduce the taxable portion of your Social Security benefits and help you stay below the 7.5% medical expense threshold.

Note: You cannot take a charitable deduction for a donation made via a QCD, because you already received the benefit of it not being counted as income.

Other Itemized Deductions You Shouldn’t Forget

While medical and charitable deductions are the most common for seniors, don’t forget these other potential deductions on Schedule A.

State and Local Taxes (SALT)

This deduction is capped at $10,000 per household. It includes a combination of your state and local property taxes plus either your state and local income taxes or sales taxes. For senior homeowners, property taxes alone can often make up a large portion of this deduction.

Home Mortgage Interest

If you still carry a mortgage on your primary or secondary home, the interest you pay is generally deductible, subject to certain limits.