Medical Expense Deduction for Retirees: The 7.5 Percent AGI Floor Explained

Many retirees fail to claim the medical expense deduction because they misunderstand which expenses count and how the AGI floor works. This guide explains how to calculate the threshold, what qualifies as a deductible expense, and how to maximize your claim. Updated for 2026.

How the 7.5 Percent AGI Floor Actually Works for Retirees

The 7.5 percent AGI floor means you can only deduct the portion of medical expenses that exceeds 7.5 percent of your adjusted gross income. If your AGI is $50,000, only medical costs above $3,750 qualify for deduction. This threshold applies to all taxpayers regardless of age, having been permanently extended after its temporary ACA-era elevation to 10 percent.¹

Consider a retiree with $60,000 in AGI who spent $12,000 on medical costs during the year. The first $4,500 (7.5 percent of $60,000) is not deductible.¹ The remaining $7,500 qualifies as an itemized deduction on Schedule A. Without tracking total expenses against this floor, many retirees assume they don't qualify when they actually do.

The deduction is only available to taxpayers who itemize. If your total itemized deductions — including mortgage interest, state taxes, and charitable gifts — fall below the standard deduction ($16,600 for married couples filing jointly in 2025), the medical expense deduction provides no benefit.² This creates a critical planning question: should you bunch medical expenses into alternating years to exceed the standard deduction threshold?

Which Medicare Premiums Count Toward Your Deduction

Medicare Part B and Part D premiums are qualified medical expenses under IRS rules.³ This includes the standard Part B premium ($185 per month in 2025) and any IRMAA surcharges added for higher-income beneficiaries. Part D prescription drug plan premiums also qualify.

Medicare Part A premiums count only if you paid them voluntarily because you did not have enough work credits for premium-free Part A. Most retirees receive Part A without a premium, so this rarely applies.

Medigap supplemental insurance premiums are also deductible as medical expenses. A typical Medigap Plan G policy costs $150 to $250 per month depending on age and location. Over a full year, these premiums alone can total $1,800 to $3,000¹ — a significant contribution toward the 7.5 percent floor.

Why Your Social Security Benefits May Affect AGI

Social Security benefits directly affect your AGI, which determines the 7.5 percent floor. Up to 85 percent of Social Security benefits are included in provisional income calculations, pushing AGI higher and making it harder to exceed the medical expense threshold.

For a married couple receiving $40,000 in annual Social Security benefits, up to $34,000 may be taxable depending on other income sources¹. This increases AGI by $34,000, raising the 7.5 percent floor by $2,550². The same medical expenses become harder to deduct because the threshold moved higher.

Roth IRA distributions do not increase AGI, making them a strategic tool for retirees managing medical deductions. By funding living expenses from Roth accounts instead of traditional IRA withdrawals, you keep AGI lower and the 7.5 percent floor smaller. This interaction between Social Security taxation, withdrawal strategy, and medical deductions is where most retirees leave money on the table.

Using Qualified Charitable Distributions to Cover Premiums

Qualified Charitable Distributions allow IRA owners age 70½ or older to transfer up to $108,000 directly to charity without including the distribution in taxable income.³ This strategy can reduce AGI and simultaneously satisfy charitable goals.

Suppose a retiree wants to donate $10,000 to a local food bank and also pays $6,000 in Medicare premiums. Without a QCD, the $10,000 charitable donation is an itemized deduction, and the $6,000 in premiums counts toward medical expenses. With a QCD, the $10,000 bypasses AGI entirely, lowering the 7.5 percent floor and potentially making more medical expenses deductible.⁴

The QCD must go directly from the IRA custodian to the qualified charity. Writing a personal check and taking an IRA distribution later does not qualify. Retirees should coordinate QCD timing with medical expense tracking to maximize the combined benefit.

HSA Withdrawals and Their Impact on Medical Expense Deductions

Health Savings Account distributions used for qualified medical expenses are tax-free, but they create a complication: you cannot deduct the same expenses twice. If you pay a $5,000 medical bill from your HSA, that $5,000 cannot also be counted toward the 7.5 percent medical expense deduction.

This means retirees with HSAs face a strategic choice. For expenses below the 7.5 percent floor, using HSA funds is clearly better — you get tax-free treatment without needing to itemize. For expenses above the floor, paying from taxable funds and saving HSA receipts for future reimbursement may produce a larger total tax benefit.

The second scenario shows why HSA funds are best reserved for years when total medical expenses fall below the 7.5 percent threshold. For years when expenses exceed the floor, paying from taxable accounts preserves HSA dollars for future use.

Overlooked Qualifying Expenses Retirees Miss

Transportation costs for medical care are deductible at the standard medical mileage rate (21 cents per mile in 2025). A retiree driving 60 miles round trip for weekly dialysis appointments accumulates 3,120 miles per year — a $655 deduction that most people never track.⁵

Home modifications for medical necessity qualify when they do not increase property value. Installing grab bars in a bathroom, widening doorways for wheelchair access, and adding stair lifts are deductible. For example, a stair lift installation costing $3,500 is fully deductible if a physician certifies the medical need.

Long-term care insurance premiums are deductible up to age-based limits. For a 70-year-old in 2025, the limit is $5,880 per person.⁶ A married couple both paying long-term care premiums can deduct up to $11,760 combined, assuming total medical expenses exceed the 7.5 percent floor.

Weight-loss programs prescribed by a physician for treating obesity qualify, as do smoking cessation programs. Lasik eye surgery, hearing aids, and dental implants are all deductible. Many retirees overlook these because they assume only doctor visits and prescriptions count.

Calculating Whether Itemizing Makes Sense for Your Situation

The decision to itemize depends on whether total itemized deductions exceed the standard deduction. For 2025, the standard deduction is $16,600 for married couples filing jointly and $11,600 for single filers.⁷

Consider a married couple with $20,000 in medical expenses, $8,000 in state and local taxes, and $5,000 in charitable contributions — their total itemized deductions would be $33,000, well above the $16,600 standard deduction.⁸ However, if their AGI is $100,000, only medical expenses above $7,500 count, reducing the medical deduction to $12,500 and total itemized deductions to $25,500.⁹

Bunching strategy: concentrate elective medical procedures, dental work, and hearing aid purchases into alternating years to push total expenses above the floor in deduction years while taking the standard deduction in off years.

Your Next Step

Gather all medical receipts from the past tax year — Medicare premium notices, prescription records, dental bills, hearing aid invoices, and mileage logs for medical travel. Total every qualified expense and compare it to 7.5 percent of your AGI. If the total exceeds the threshold, run a Schedule A comparison against the standard deduction. For retirees with significant medical costs and AGI under $75,000, the medical expense deduction retirees claim almost always produces meaningful tax savings. Use the IRS Publication 502 checklist to ensure no qualifying expense is missed.