2025 Tax Guide: Deducting Medical Expenses & OBBBA

If you faced significant healthcare costs last year, you might be looking for a silver lining on your 2025 income tax return. While the tax code offers a deduction for medical expenses, claiming it isn't always straightforward. Income thresholds, itemization rules, and specific eligibility requirements can make this a complex area to navigate.

However, writing off these costs can lead to substantial savings if you qualify. Let's break down the rules for 2025, look at how new legislation might affect your filing strategy, and identify exactly which expenses you can claim.

The 7.5% rule and itemization

The first hurdle to clearing the medical expense deduction is the "floor." You can only deduct unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI).

Here is how the math works: If your AGI for 2025 is $100,000, your threshold is $7,500. You cannot deduct the first $7,500 of your medical bills. However, if you spent $10,000 on eligible care, you could potentially write off the $2,500 difference.

Crucially, you must itemize your deductions to claim this benefit. In recent years, fewer taxpayers have itemized because the standard deduction has been so high. But the landscape has shifted. The "One Big Beautiful Bill Act" (OBBBA) has quadrupled the limit for state and local tax (SALT) deductions. This change means that for the 2025 tax year, itemizing might be a much more attractive strategy than it has been in the past. If you plan to itemize to take advantage of the SALT changes, you should definitely review your medical receipts.

Which expenses actually count?

It’s not just hospital stays and doctor visits that qualify. If you expect to cross that 7.5% threshold, you will want to capture every eligible cost. Here are several categories that are often overlooked.

Transportation costs

Getting to your appointments counts. You can deduct taxi fares, public transit costs, or the expenses of using your own vehicle. For 2025, you can calculate your vehicle costs at 21 cents per mile, plus parking and tolls. Alternatively, you can deduct actual out-of-pocket costs for gas and oil (but not general maintenance, insurance, or depreciation).

Insurance premiums

Health insurance is often one of the largest annual expenses for a household. You can deduct the premiums you paid, provided they weren't paid with pre-tax dollars from your paycheck.

Premiums for long-term care insurance are also eligible, though the IRS caps the deduction based on your age. For 2025, the limits are:

• 40 and under: $480
• 41 to 50: $900
• 51 to 60: $1,800
• 61 to 70: $4,810
• Over 70: $6,020

Therapists, nurses, and specialists

Services provided by non-physicians are deductible if they relate to a specific medical condition. This includes payments to psychologists, acupuncturists, and physical therapists (for example, rehab after knee surgery). However, general health services don't qualify—so you can't deduct a personal trainer even if they help you get in shape.

Vision, hearing, and dental

You can write off the costs of eyeglasses, contact lenses, hearing aids, and dentures. Most dental work qualifies as well. The distinction here is usually between "medical" and "cosmetic." Necessary surgery is deductible; teeth whitening is not.

Prescriptions and programs

Prescription drugs are eligible expenses. Over-the-counter medications like aspirin are not, even if a doctor suggests you take them.

For lifestyle-related programs, the rules are specific. Smoking-cessation programs and prescribed drugs for nicotine withdrawal are deductible. Weight-loss programs qualify only if they are a treatment for a specific physician-diagnosed disease, such as obesity or hypertension. In these cases, you can deduct program fees and meeting costs, though the cost of diet food generally remains non-deductible.

Don't forget your dependents

You aren't limited to your own bills. You can deduct medical expenses paid for your dependents, such as your children. In some cases, you may even be able to claim expenses paid for a parent or grandparent who would qualify as your dependent if not for their gross income or filing status.

Let's strategize for 2025

Taxes shouldn't be a guessing game. If you have significant medical expenses and are wondering if itemizing makes sense under the new OBBBA rules, we can help you run the numbers. At SD Mayer & Associates, we focus on finding the best strategic path for your financial health. Contact us today to ensure you aren't leaving money on the table.