When dealing with large medical expenses, timing your payments can have a significant impact on your tax situation. The end of the calendar year presents a key decision point for taxpayers who are trying to maximize their medical expense deductions: should you pay your medical bills before or after December 31? This blog explores the tax implications of when you pay substantial medical costs, how timing affects your ability to claim a deduction, and strategies to make the most out of your healthcare spending.
Understanding the Medical Expense Deduction
The Internal Revenue Service (IRS) allows taxpayers who itemize deductions to deduct certain qualified, unreimbursed medical and dental expenses that exceed 7.5% of their Adjusted Gross Income (AGI). Only the portion of medical expenses above this threshold is deductible.
For example, if your AGI in 2025 is $100,000, then only the amount of your qualified medical expenses exceeding $7,500 would be deductible. If your total medical expenses are $12,000, you could deduct $4,500 on Schedule A of your Form 1040.
Why the Timing of Medical Payments Matters
The IRS uses a “cash basis” accounting system for individual taxpayers. This means that medical expenses are deductible in the year they are actually paid, not when they are billed or when the service is received. Therefore, if you want to deduct a large medical bill on your 2025 tax return, you must pay it by December 31, 2025. If you wait until January 1, 2026, the expense applies to your 2026 tax return instead.
As a result, the decision of whether to pay large medical bills before or after the end of the year is not just a budgeting matter — it’s also a strategic tax decision.
Scenarios Where Paying Before December 31 Makes Sense
Paying large medical bills before year-end can be advantageous in several situations, particularly when it helps you exceed the 7.5% AGI threshold. Here’s when it may be smart to accelerate payments:
1. You Already Have Significant Medical Expenses This Year
If you’ve already paid enough in medical expenses to approach or surpass 7.5% of your AGI, paying another large bill before December 31 can increase the amount that’s deductible. The more you pay this year, the more you may be able to deduct.
2. You Plan to Itemize Deductions in 2025
If your total itemized deductions (including mortgage interest, state and local taxes, charitable donations, and medical expenses) are likely to exceed the standard deduction in 2025, paying the medical bill now can add to your total deduction amount.
3. You Expect Lower Income or Higher AGI Next Year
A lower AGI this year makes it easier to exceed the 7.5% threshold. If your income is expected to rise in 2026, making it harder to deduct future medical expenses, it’s wise to accelerate payments into 2025.
4. You Have the Cash Available
If you’re in a financial position to pay now without incurring debt, it makes sense to take the deduction in the current year rather than delay and potentially lose the tax benefit if you don’t exceed the threshold next year.
Scenarios Where Delaying Payment May Be Better
In some cases, it might be smarter to hold off on paying medical bills until the new year. Here are a few reasons to delay:
1. You Haven’t Reached the 7.5% Threshold This Year
If your current year’s medical expenses are nowhere near the AGI threshold, and you don’t expect to benefit from itemizing, there’s no tax advantage to paying before December 31. Delaying payment may allow you to bunch expenses into the next year and potentially exceed the threshold then.
2. You Plan to Bunch Deductions in 2026
Some taxpayers alternate years for itemizing deductions. If you plan to claim the standard deduction in 2025 and itemize in 2026, delaying medical payments into 2026 could help you maximize deductions next year.
3. You Have Other Financial Priorities
If paying a large medical bill before year-end would compromise your ability to cover essential expenses or contribute to tax-advantaged accounts like IRAs or HSAs, you may want to postpone the payment.
4. You Expect Higher Deductible Expenses Next Year
If you know you’ll incur major medical procedures or long-term care costs next year, it might make sense to delay this year’s bills to combine all expenses in one higher-deduction year.
How to Ensure Payment Counts for the Correct Year
The IRS considers a medical expense paid in the year you:
- Mail a check (as long as it’s postmarked by December 31)
- Initiate an electronic payment (such as online banking, debit card, or credit card)
- Charge the expense to a credit card — even if the bill isn’t paid until the next year
So, if you charge a medical bill to your credit card on December 30, 2025, it counts as a 2025 payment — even if you don’t pay the credit card balance until 2026. This allows for flexibility in managing year-end payments.
Combining With Other Tax Planning Strategies
Coordinating the timing of your medical payments with other tax planning tactics can enhance the overall benefit. Consider these complementary strategies:
- Charitable Contributions: Bunch donations and medical expenses into one year to maximize itemized deductions.
- Capital Gains Planning: Manage AGI by realizing capital losses to lower income and reduce the medical expense threshold.
- Roth Conversions: Be cautious — converting a traditional IRA to a Roth increases AGI, which can make it harder to exceed the 7.5% medical expense threshold.
- Health Savings Account (HSA) Use: Medical bills paid with HSA funds are not deductible again, but you can choose to save your HSA and pay out-of-pocket to take the itemized deduction.
Recordkeeping Is Crucial
Whether you pay medical bills before or after December 31, you must keep clear records to prove the timing and purpose of the payments. This includes:
- Invoices and receipts from medical providers
- Proof of payment (credit card statement, bank statement, or canceled check)
- Detailed logs for mileage and travel to appointments
- Documentation that shows expenses were not reimbursed by insurance or pre-tax plans
These records will help you substantiate the deduction in case of an IRS audit.
Conclusion: Make the Choice That Maximizes Your Tax Benefit
The decision to pay large medical bills before or after December 31 should be based on your current and projected income, whether you plan to itemize deductions, and your ability to exceed the 7.5% AGI threshold. If paying now helps you unlock a sizable deduction, it could be a smart move. On the other hand, if the deduction won’t benefit you this year, it may be worth postponing payment and potentially bunching expenses next year.
Taxpayers with large or variable medical costs should consider working with a tax professional to analyze the timing and ensure they are maximizing their tax savings. With the right planning, even unavoidable medical expenses can be used strategically to reduce your overall tax liability.
