7.2 Medical & Dental Expenses (7.5% Floor)
Key Takeaways
- Medical and dental expenses are deductible only to the extent they exceed 7.5% of AGI — the 7.5% floor is permanent under OBBBA (was scheduled to revert to 10%)
- Deductible in the year PAID, regardless of when services were provided
- Insurance premiums paid with pre-tax dollars (employer cafeteria plan, HSA, FSA) are NOT deductible
- Medical mileage rate for 2025 is 21 cents per mile (plus parking and tolls)
- Long-term care insurance premiums are deductible up to age-based limits; self-employed taxpayers deduct LTC and health premiums above the line
Medical & Dental Expenses (7.5% AGI Floor)
Medical and dental expenses are itemized deductions claimed on Schedule A (Form 1040). The deduction is subject to a significant limitation: only expenses exceeding 7.5% of your Adjusted Gross Income (AGI) are deductible.
OBBBA Update: The 7.5% floor was scheduled to revert to 10% of AGI after 2020 under pre-ACA law, then was extended several times. The One Big Beautiful Bill Act (signed July 4, 2025) made the 7.5% floor permanent—there is no scheduled increase.
The 7.5% AGI Floor Calculation
Formula: Deductible Medical Expenses = Total Qualified Medical Expenses – (AGI × 7.5%)
Example Calculation (2025):
| Item | Amount |
|---|---|
| Adjusted Gross Income (AGI) | $80,000 |
| 7.5% of AGI (Floor) | $6,000 |
| Total Qualified Medical Expenses | $15,000 |
| Deductible Amount | $9,000 |
EA Exam Tip: Always calculate the floor first, then subtract from total expenses. The 7.5% threshold is permanent under OBBBA—never use 10% on the 2025 exam.
Whose Expenses Qualify?
You can deduct medical expenses paid for:
- Yourself
- Your spouse
- Your dependents (at the time services were provided OR when you paid)
- Individuals who would have been your dependent except:
- They had gross income of $5,200 or more in 2025 (the gross-income test threshold), OR
- You (or your spouse) could be claimed as a dependent on someone else's return
Deductible Medical Expenses
Healthcare Providers & Services
- Physicians, surgeons, dentists, and specialists
- Chiropractors, psychiatrists, psychologists
- Hospital services and nursing care
- Laboratory fees and diagnostic tests
- Acupuncture treatments
- Alcohol and drug addiction treatment (inpatient)
- Smoking-cessation programs and prescription nicotine-withdrawal drugs
Prescriptions & Medical Supplies
- Prescription medications
- Insulin (even without a prescription)
- Eyeglasses, contact lenses, hearing aids
- Crutches, wheelchairs, other medical equipment
- Guide dogs and service animals (including care/training)
Insurance Premiums (Paid with After-Tax Dollars)
- Health insurance premiums (not paid through cafeteria plan)
- Medicare Part B and Part D premiums
- Medicare Supplement (Medigap) policies
- Qualified long-term care insurance (subject to age-based limits)
Long-Term Care Insurance Premium Limits (2025)
| Age Before End of Tax Year | Maximum Deductible Premium |
|---|---|
| 40 or younger | $480 |
| 41 to 50 | $900 |
| 51 to 60 | $1,800 |
| 61 to 70 | $4,810 |
| Over 70 | $6,020 |
EA Exam Tip: Self-employed individuals deduct 100% of qualified long-term care premiums (up to age-based limits) and self-employed health insurance as an adjustment to income on Schedule 1—not as an itemized deduction. This is unchanged by OBBBA.
Medical Travel Deduction
You can deduct transportation costs for medical care.
Standard Mileage Rate (2025)
21 cents per mile for medical travel (Notice 2025-5; unchanged from 2024).
What's Included:
- Mileage to doctor appointments, hospitals, pharmacies
- Parking fees and tolls (in addition to mileage)
- Ambulance services
- Bus, taxi, train, or plane fare for medical treatment
Lodging While Away from Home
- $50 per night per person limit while receiving medical care away from home
- Lodging for a companion (e.g., parent with sick child) also qualifies at $50/night
- Meals generally NOT deductible unless provided as part of inpatient care
Example (2025):
A taxpayer drives 500 miles round trip for specialized medical treatment.
- Mileage: 500 × $0.21 = $105
- Parking at hospital: $20
- Total deductible transportation: $125
Capital Improvements for Medical Purposes
Home improvements primarily for medical care may be deductible.
Fully Deductible (No Value Added)
- Wheelchair ramps at entrances/exits
- Widening doorways and hallways
- Grab bars and bathroom railings
- Wheelchair-accessible cabinets
- Stair lifts and porch lifts
- Modified smoke detectors/warning systems for the deaf
Partially Deductible
If the improvement increases property value, only the excess cost over the value increase is deductible.
Example:
| Item | Amount |
|---|---|
| Cost of installing elevator | $20,000 |
| Increase in home value | $8,000 |
| Deductible medical expense | $12,000 |
EA Exam Tip: Swimming pools/spas are rarely deductible—must be prescribed and not used recreationally, and only the excess cost over any FMV increase qualifies.
Non-Deductible Medical Expenses
NEVER Deductible:
- Cosmetic surgery (unless correcting deformity from congenital abnormality, accident, or disfiguring disease)
- Gym memberships / health-club dues (even if recommended by a doctor)
- General health items: toothpaste, toiletries, cosmetics
- Over-the-counter medicines (except insulin)
- Nicotine gum/patches not requiring a prescription
- Controlled substances illegal under federal law (including marijuana, even if legal under state law)
- Funeral and burial expenses
- Teeth whitening
- Electrolysis / hair transplants (cosmetic)
- Maternity clothes
- Diaper services
Special Rule – Insurance Premiums NOT Deductible:
- Premiums paid through an employer's cafeteria plan (pre-tax)
- Premiums paid from a Health Savings Account (HSA)
- Premiums paid with Flexible Spending Account (FSA) funds
- Life insurance premiums
- Disability insurance premiums for lost wages
EA Exam Tip: The key question is whether premiums were paid with pre-tax or after-tax dollars. Only after-tax premium payments qualify.
Timing Rules
Cash Method Rules Apply
- Deduct expenses in the year paid, not the year services were provided
- Credit card charges are deductible when charged, not when the bill is paid
- Checks are deductible when mailed or delivered
Reimbursements
- Expenses reimbursed by insurance are NOT deductible
- A reimbursement received in a later year after taking the deduction may be taxable (tax benefit rule)
Prepaid Expenses
- Generally deductible in year paid if for services to be received within 12 months
Summary Table: Deductible vs. Non-Deductible
| Deductible | Non-Deductible |
|---|---|
| Doctor, dentist, hospital fees | Cosmetic surgery (elective) |
| Prescription drugs | Over-the-counter medicines |
| Medical equipment (crutches, wheelchair) | Gym membership |
| Health insurance (after-tax premiums) | Insurance paid with pre-tax dollars |
| Long-term care insurance (up to limits) | Life insurance premiums |
| Medical travel (21¢/mile in 2025) | General transportation |
| Service animals | Pet expenses (non-service) |
| Wheelchair ramp installation | Swimming pool (recreational) |
| Alcohol/drug treatment | Marijuana (illegal federally) |
EA Exam Tips
- 7.5% floor is permanent under OBBBA — never use 10% for 2025
- 21¢/mile is the 2025 medical mileage rate
- Cafeteria plan / HSA / FSA premiums are NOT deductible (pre-tax)
- Capital improvements: lesser of cost or excess over FMV increase
- Marijuana never qualifies even in legal-marijuana states (federally illegal)
A taxpayer has 2025 AGI of $100,000 and total qualified medical expenses of $10,000. What amount can be deducted on Schedule A?
Which of the following medical expenses is NOT deductible on a 2025 Schedule A?
For 2025, what is the standard mileage rate for medical travel?