How does the medical expense deduction and its 7.5% AGI floor work?
You can deduct unreimbursed medical and dental expenses, but only the portion that exceeds 7.5% of your adjusted gross income, and only if you itemize. So if your AGI is $100,000, the first $7,500 of medical costs isn't deductible, only what's above that counts. Qualifying expenses are broad: insurance premiums you pay yourself, deductibles, copays, prescriptions, dental and vision care, long-term care, mental health, and even mileage to appointments. This deduction tends to matter in a year with a major surgery, a long hospital stay, fertility treatment, or significant long-term-care costs. A useful move is to bunch elective procedures into one year to clear the 7.5% floor. Premiums paid with pre-tax payroll dollars or an HSA don't count, since they were never taxed.
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