How Does Claiming a Medical Expense Deduction on Your Taxes Work?

You can snag a tax break for medical expenses -- but there are rules you'll need to follow.

Medical bills are a major expense a lot of people have to bear. In fact, a big contributor to U.S. credit card debt is none other than medical bills.

If you spent a lot of money on medical expenses last year, you may be wondering whether it will serve as a tax break for you. The answer is that it depends on how you do your taxes and how much your bills amounted to relative to your income.

Are you itemizing on your return?

Tax filers can go one of two routes when filing their returns: They can take the standard deduction, or they can itemize their personal deductions to see if that number is higher. In order to claim a medical expense deduction on your taxes, you must be itemizing on your return.

How much did you spend?

The rule for claiming a medical expense deduction is that you can only write off healthcare costs that exceed 7.5% of your adjusted gross income. And that's where things get a little complicated.

Let's say your adjusted gross income for 2022 was $70,000, and you spent $5,000 on medical bills last year. Clearly, that means your healthcare costs ate up a sizable chunk of your income. But if your adjusted gross income last year was $70,000, $5,000 is only about 7.1% of that. So in this situation, you get no deduction.

Now, let's say that instead of spending $5,000 on medical bills in 2022, you spent $8,000. That's over 11% of your income, so you should be good to claim a deduction if you're itemizing on your tax return.

However, you don't get to claim an $8,000 deduction. You can only claim amounts beyond 7.5% of your income.

Since 7.5% of $70,000 is $5,250, it means your first $5,250 in medical expenses cannot be deducted. You can only claim expenses above that threshold. So in this example, with $8,000 in medical spending, you're looking at a deduction worth $2,750.

What expenses can you claim?

There tends to be confusion about the medical expense deduction because you might assume it only applies to doctor visits. Not so. You can claim expenses that extend to dental care if you had a lot of bills to cover out of pocket. You may also, in some cases, be eligible to claim transportation expenses as part of the medical expense deduction.

Say you needed treatment at a facility 40 miles away from your house multiple times last year. You can generally claim expenses like mileage, tolls, and applicable parking fees as part of your total medical expense deduction.

Know the rules

If you spent a lot of money on healthcare bills last year, then it absolutely pays to see if you're entitled to claim a medical expense deduction. But claiming an incorrect deduction on your tax return could lead to an IRS audit, and that's probably not something you want. Make sure you understand the rules fully so you don't claim the wrong amount and subject yourself to further scrutiny from the IRS.