Think your out-of-pocket health expenses are fully tax-deductible? Not so fast!
Myth: Every dollar I spend on health insurance reduces my taxes.
Reality: You only get a deduction if you itemize and your medical expenses exceed 7.5% of your AGI.
Let’s break it down:
- If you take the standard deduction, you get zero tax benefit.
- Even if you itemize, only the portion of medical expenses above 7.5% of your AGI is deductible.
Example:
- AGI: $100,000
- Medical Expenses: $10,000
- Deductible Amount: $10,000 – $7,500 = $2,500 (only if you itemize!)
And this rule isn’t changing in 2025! Congress made the 7.5% threshold permanent; so unless laws change, this is how it works.
Before assuming you’re getting a tax break, check if you itemize and cross that 7.5% threshold—otherwise, you might not be saving anything!
Contact Paragon today if you have any questions.
