Medical Expense Deduction In California
The medical expense deduction allows taxpayers who itemize to deduct qualifying out-of-pocket medical and dental costs that exceed 7.5 percent of their adjusted gross income on their federal return. Eligible expenses include premiums not paid by an employer, prescription costs, surgery, and certain long-term care costs.
California conforms to the federal 7.5 percent AGI threshold for the medical expense deduction on the state return. Given California's high cost of living and elevated healthcare costs, residents who have significant unreimbursed medical expenses may find it worthwhile to itemize on both their federal and California state returns.
California filers should gather all Explanation of Benefits statements, insurance premium records, and receipts for out-of-pocket costs before filing. Because California has its own standard deduction amounts that differ from the federal amounts, it is worth calculating whether itemizing on the state return makes sense even if you take the federal standard deduction.