Part 2: How Medical Expense Deductions Really Work in 2025 — What the IRS Actually Allows

How Medical Expense Deductions Really Work in 2025 — What the IRS Actually Allows

Medical deductions sound simple, but the IRS rules are strict — and most taxpayers receive no deduction at all because they misunderstand what qualifies, whose expenses can be included, and how reimbursements affect the calculation.

1️⃣ What Counts as a Medical Expense?

According to IRS rules, medical expenses must be primarily for the diagnosis, cure, mitigation, treatment, or prevention of disease.
They must address a specific medical condition — not general health or cosmetic improvement.
Eligible expenses include payments to doctors, dentists, surgeons, therapists, and hospitals, as well as diagnostic devices, lab tests, and medically necessary equipment.

2️⃣ Which Year Can You Deduct the Expense?

You may deduct only the expenses you paid during the year, regardless of when the care occurred.
Payment timing rules:

• Check → counted on the mailing/delivery date.
• Online or phone payment → date shown on bank statement.
• Credit card → year the charge was made (not the payment date).

You cannot deduct expenses paid by insurance or reimbursed by any source.
If you mistakenly omitted past medical expenses, you may amend using Form 1040-X.

3️⃣ Whose Medical Expenses Can You Include?

You may include expenses for:

• Yourself
• Your spouse (if married at the time of care or payment)
• Your dependents (even if they fail certain tests like gross income or joint return tests)

Qualified dependents include qualifying children, qualifying relatives, and certain individuals under multiple support agreements.
Children of divorced or separated parents may be treated as dependents of both parents for medical deduction purposes.

4️⃣ What’s Deductible vs. Not Deductible?

The IRS provides clear distinctions. Here are key examples derived from IRS rules:

These examples come directly from the types of expenses listed in the IRS guidance.

5️⃣ How Insurance & Reimbursements Affect Deductions

You may deduct only unreimbursed expenses.
Insurance reimbursements — even when they exceed the cost of a specific procedure — reduce all medical expenses for the year.
Reimbursements from HRAs must also reduce medical deductions because HRAs are employer-funded.

6️⃣ Self-Employed Health Insurance Rules

Self-employed individuals may deduct health insurance premiums “above the line,” but only if:

• The plan is established under the business.
• The taxpayer had net profit for the year.
• The taxpayer (or spouse) is not eligible for employer-subsidized coverage.

Premiums for a non-dependent child under age 27 also qualify.
Amounts not eligible for the self-employed deduction may still be included on Schedule A if they exceed the 7.5% AGI threshold.

💬 Frequently Asked Questions