Medical expenses can be one of the largest costs that individuals and families face, especially for seniors, those with chronic conditions, or those without comprehensive insurance. While the federal tax code offers some relief through itemized deductions for qualified medical expenses, the same is not true in all states. In fact, several U.S. states do not allow any deduction for medical expenses on their personal income tax returns. This blog explores which states deny these deductions completely, the implications for taxpayers, and how to navigate the system if you reside in one of these jurisdictions.
How Medical Expense Deductions Work at the Federal Level
At the federal level, taxpayers who itemize deductions on IRS Schedule A can deduct qualified medical expenses that exceed 7.5% of their adjusted gross income (AGI). These expenses must be unreimbursed and must relate to the diagnosis, cure, mitigation, or prevention of disease. This includes doctor visits, hospital stays, prescription medications, health insurance premiums (in some cases), dental and vision care, and long-term care services.
This federal deduction can significantly reduce taxable income, but only if the taxpayer itemizes instead of taking the standard deduction. Even then, the 7.5% AGI threshold must be exceeded before any deduction applies.
States That Do Not Allow Medical Expense Deductions
Some states either do not permit itemized deductions at all, or specifically exclude medical expenses from their allowable deductions. In such states, even if you qualify for a medical deduction on your federal return, you will receive no additional tax relief at the state level. Below is a list of states where medical expense deductions are not allowed.
1. Pennsylvania
Pennsylvania’s tax code is structured very differently from the federal system. It does not allow itemized deductions, and medical expenses are not deductible on the Pennsylvania personal income tax return under any circumstances. Instead, the state uses a flat tax rate on defined classes of income, and very few deductions are permitted.
2. Massachusetts
Massachusetts does not allow itemized deductions on its state tax return. Instead, it provides a flat-dollar personal exemption and a limited number of specific deductions (such as for student loan interest and rent). Medical expenses are not among the deductible items on the Massachusetts return, even if they qualify federally.
3. Connecticut
Connecticut follows a similar model, where itemized deductions are not allowed. Medical expenses cannot be deducted on the state income tax return, regardless of the taxpayer’s age, income, or out-of-pocket healthcare costs. The state offers a few limited exemptions and credits, but healthcare deductions are not among them.
4. New Jersey
New Jersey does not permit standard itemized deductions but does allow a very limited medical expense deduction in certain cases. However, the threshold is extremely high: only expenses exceeding 2% of gross income qualify, and only some categories of expenses are included. In practice, most taxpayers are unable to benefit, effectively making it a non-deductible state for medical expenses for the majority of filers.
5. Illinois
Illinois does not allow medical expense deductions on its individual income tax return. The state does not permit the same itemized deductions that are available on the federal return. Taxpayers who claim large medical deductions federally will find no additional benefit on their Illinois return.
6. Indiana
Indiana also does not offer a deduction for medical expenses. While it does allow certain state-specific deductions and exemptions, medical costs are not included. Taxpayers in Indiana must rely solely on the federal deduction if they qualify under the federal AGI threshold rules.
7. Michigan
Michigan’s tax code provides for a limited set of itemized deductions and medical expenses are not one of them. Michigan uses its own set of adjustments, and out-of-pocket healthcare costs do not factor into the personal income tax calculation.
8. Rhode Island
Rhode Island conforms closely to federal AGI but does not allow itemized deductions on its state tax return. As such, medical expenses, no matter how significant, are not deductible on the Rhode Island return.
9. North Carolina
North Carolina does not permit itemized deductions that include medical expenses. The state tax system was reformed in recent years and eliminated many deductions in favor of a simplified flat tax rate and standard deduction. Medical expenses are not deductible under the new structure.
10. West Virginia
West Virginia does not allow a deduction for medical expenses. Taxpayers in the state use a modified federal AGI but cannot include healthcare costs among their allowable itemized or standard deductions.
Why Some States Disallow Medical Deductions
The primary reason some states exclude medical deductions is tax simplicity. By using standardized deductions or a flat-tax approach, these states simplify tax administration and minimize the range of allowable deductions. Additionally, state tax bases are often structured to raise revenue with minimal administrative burden, and allowing complex deductions like medical expenses introduces both compliance and enforcement challenges.
Implications for Residents
Taxpayers living in these states must be aware that their out-of-pocket healthcare expenses will not reduce their state tax liability, even if those expenses are large. This is particularly impactful for:
- Senior citizens with high long-term care costs
- Families dealing with chronic medical conditions
- Self-employed individuals paying high insurance premiums
In these cases, careful tax planning becomes essential to maximize federal deductions and manage overall household finances, as no relief will be forthcoming from state tax returns.
What You Can Do If You Live in One of These States
If you reside in a state that does not allow medical deductions, consider the following strategies:
- Maximize Federal Deductions: Bunch medical expenses into a single tax year to surpass the 7.5% AGI threshold.
- Use Health Savings Accounts (HSAs): These accounts offer pre-tax savings for medical expenses, reducing federal and often state taxable income.
- Track All Expenses Carefully: Ensure every qualifying expense is documented to make the most of available federal deductions.
- Consult a Tax Professional: A tax advisor can help you structure expenses and deductions more efficiently, even when the state doesn’t provide specific relief.
Conclusion: Know Your State’s Tax Landscape
While the federal government offers a medical expense deduction to those who itemize and exceed the AGI threshold, many states choose not to offer similar benefits. States such as Pennsylvania, Massachusetts, Connecticut, and Illinois provide no opportunity to deduct medical costs, regardless of the amount spent. This reality underscores the importance of understanding your state’s tax structure and seeking alternative strategies to manage healthcare costs from a tax perspective.
Always consult your state’s Department of Revenue or a licensed tax professional to ensure your tax filings are optimized under both federal and state law.
