As individuals over 65, managing healthcare costs is an important part of financial planning. Many medical and dental expenses can reduce your tax bill. For 2026, understanding the rules around these itemized deductions, especially the 7.5% AGI threshold, is important. Here’s how you can keep more of your money by claiming what you’re allowed.
Executive Summary
- You can deduct unreimbursed medical and dental expenses that exceed 7.5% of your Adjusted Gross Income (AGI).
- This deduction is only available if you choose to itemize your deductions instead of taking the standard deduction.
- For 2026, the basic standard deduction for a single individual is $16,100, with an additional $2,050 if you are 65 or older.
- Keep careful records of all medical bills, insurance statements, and payments.
- Consider “bunching” medical expenses into one tax year to meet the 7.5% AGI threshold.
The 7.5% AGI Threshold: What to Know
The Internal Revenue Service (IRS) allows taxpayers to deduct unreimbursed medical and dental expenses that exceed a specific percentage of their Adjusted Gross Income (AGI). For the 2026 tax year, this threshold remains permanently set at 7.5% of your AGI. This means you can only deduct the portion of your qualified medical expenses that goes above this 7.5% mark.
What is Adjusted Gross Income (AGI)?
Your Adjusted Gross Income (AGI) is a key figure on your tax return. It’s your total gross income minus certain “above-the-line” deductions, such as contributions to traditional IRAs, student loan interest, or self-employed health insurance premiums. Your AGI is found on Line 11 of Form 1040. It’s important because many tax benefits, including the medical expense deduction, are tied to this number.
How the 7.5% Threshold Works
Let’s consider an example. If your AGI for 2026 is $80,000, your 7.5% AGI threshold would be $6,000 ($80,000 multiplied by 0.075). Therefore, you can only deduct the medical and dental expenses that exceed this $6,000. If you had $10,000 in qualified unreimbursed medical expenses, you could deduct $4,000 ($10,000 minus $6,000). This 7.5% AGI threshold is a key factor in determining your deductible amount.
What Counts as a Qualified Medical Expense?
IRS Publication 502, Medical and Dental Expenses, explains what the IRS considers a qualified medical expense. These are costs for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body. You can find more details directly from the IRS.
Common Deductible Expenses
- Payments to doctors, dentists, surgeons, chiropractors, psychiatrists, and psychologists.
- Prescription medications and insulin.
- Dental care, including braces, crowns, fillings, extractions, and preventative treatments.
- Vision care, including eyeglasses, contact lenses, and LASIK surgery.
- Health, dental, and vision insurance premiums paid with after-tax dollars.
Less Obvious Deductions
- Transportation: Costs to and from medical care, including mileage (21 cents per mile for 2025, plus tolls and parking), taxi, bus, or train fares, and ambulance costs.
- Long-Term Care Premiums: Qualified long-term care insurance premiums are deductible, subject to age-based limits. For individuals over 70 in 2026, this limit is $6,200.
- Service Animals: The costs of buying, training, and maintaining a guide dog or other service animal for a visually impaired or hearing-impaired person, or for other physical disabilities.
- Medically Necessary Home Improvements: Modifications to your home for medical care, such as ramps or widening doorways, can qualify.
- Weight-Loss Programs: If prescribed to treat a specific medical condition like heart disease or hypertension.
What’s NOT Deductible
- Cosmetic surgery (unless necessary to correct a deformity or personal injury).
- Over-the-counter medications (except insulin).
- Items for general health improvement, such as vitamins, nutritional supplements, or gym memberships (unless prescribed to treat a specific medical condition).
- Funeral or burial expenses.
- Insurance premiums paid with pre-tax dollars (e.g., through an employer’s cafeteria plan).
Itemizing vs. Standard Deduction: How to Choose
To claim medical and dental expense deductions, you must itemize your deductions on Schedule A (Form 1040). This means you forgo the standard deduction. It’s important to compare your total itemized deductions against your available standard deduction to see which provides the greater tax benefit. IRS Publication 501 provides detailed information on these choices.
2026 Standard Deduction Amounts for Older Adults
The standard deduction amounts are adjusted annually for inflation. For 2026, they are:
- Single Filers: $16,100
- Married Filing Jointly: $32,200
- Head of Household: $24,150
Additional Amounts for Age/Blindness
Individuals over 65 or those who are blind receive an additional standard deduction amount:
- $2,050 for single filers or head of household.
- $1,650 per qualifying individual for married filing jointly or separately.
For example, a single individual over 65 would have a total standard deduction of $18,150 ($16,100 + $2,050).
When Itemizing Makes Sense
You should itemize if your total itemized deductions (including medical expenses above the 7.5% AGI threshold, state and local taxes, mortgage interest, and charitable contributions) exceed your applicable standard deduction. For many individuals over 65, especially those with substantial medical bills, this calculation is important. If your itemized deductions are less than your standard deduction, you should take the standard deduction.
Real-World Example: Mr. Arthur Jenkins’ 2026 Tax Scenario
Let’s look at Mr. Arthur Jenkins, a 70-year-old single retiree, to see how medical and dental expense deductions work in practice for 2026.
Mr. Arthur Jenkins is a 70-year-old single retiree living in California. His income for 2026 includes Social Security, a pension, and investment income. He also incurred substantial medical and dental expenses.
- Age: 70
- Filing Status: Single
- Social Security Income: $30,000
- Pension Income: $50,000
- Investment Income: $25,000
- Medical and Dental Expenses: $15,000
- State Income Tax Paid: $6,000
- Property Tax Paid: $4,000
- Charitable Contributions: $2,000
The Numbers Breakdown for 2026
Income and Adjusted Gross Income (AGI)
- Taxable Social Security Income: $25,500.00
- Total Gross Income: $100,500.00
- Adjusted Gross Income (AGI): $100,500.00
Medical and Dental Expense Deduction
The IRS allows you to deduct unreimbursed medical and dental expenses that exceed 7.5% of your AGI (IRC Section 213, IRS Pub 502).
- Medical Expense AGI Threshold (7.5% of AGI): $7,537.50 (Calculated as $100,500 AGI * 0.075)
- Deductible Medical and Dental Expenses: $7,462.50 (Calculated as $15,000 – $7,537.50)
State and Local Tax (SALT) Deduction
The federal SALT deduction is capped at $10,000 per household (IRC Section 164).
- Total State and Local Taxes Paid: $10,000.00 ($6,000 State Income Tax + $4,000 Property Tax)
- Deductible SALT (Federal Cap): $10,000.00
Total Itemized Deductions
These are compared to the standard deduction for his filing status (IRS Pub 501).
- Total Itemized Deductions: $19,462.50 ($7,462.50 Medical + $10,000 SALT + $2,000 Charitable)
- Federal Standard Deduction (Single, 65+): $18,150.00 ($16,100 basic + $2,050 additional for 65+)
- Federal Deduction Taken: $19,462.50 (Since itemized deductions are higher than the standard deduction)
Federal Tax Calculation
- Federal Taxable Income: $81,037.50 (Calculated as $100,500 AGI – $19,462.50 Federal Deduction Taken)
- Federal Income Tax: $12,580.25 (Based on 2026 single filer tax brackets for $81,037.50 taxable income)
- Net Investment Income Tax (NIIT): $0.00 (Mr. Jenkins’ AGI is below the $200,000 threshold for single filers (IRC Section 1411))
California State Tax Calculation
- California Standard Deduction (Single): $5,700.00
- California Itemized Deductions: $19,462.50 (CA allows full state/property tax paid for itemization)
- California Deduction Taken: $19,462.50 (Itemized deductions are higher)
- California Taxable Income: $81,037.50
- California Income Tax: $4,010.49
Total Tax Liability
- Total Tax Liability: $16,590.74 ($12,580.25 Federal + $4,010.49 California)
Takeaway
For individuals over 65 in 2026, medical and dental expense deductions can reduce taxable income, but only for amounts exceeding 7.5% of your AGI. It’s important to track all eligible expenses. Additionally, the $10,000 federal cap on State and Local Tax (SALT) deductions can limit the benefit of high property and state income taxes, especially in states like California. Always compare your itemized deductions to the standard deduction.
