Make the most of health care expenses before end of year
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As health care costs continue to rise, you may want to make sure you’re not leaving valuable tax deductions or pre-tax dollars on the table this year.
Rising premiums, higher deductibles and out-of-pocket maximums are putting more pressure on household budgets, making year-end planning important, experts say.
Among employer-based plans that cover about 154 million people under age 65, premiums paid by workers could rise an average of 6% to 7% in 2026, according to the consulting firm. Mercer. For plans purchased through the Affordable Care Act marketplace, premiums will more than double next year (by an average of 114%) if enhanced premium tax credits expire at the end of the year as planned. Kaiser Family Foundationa health policy research group.
While medical expenses are often unpredictable and unwelcome, there may be strategies you can use to make these expenses a little less painful.
Here’s what you need to know.
Receive scheduled medical services sooner
Depending on your healthcare expenses so far for 2025, you may end up paying less, or even nothing at all, for qualified medical services before the end of the year.
Once you meet your plan’s deductible, the amount you pay will be less than before you reached your deductible, as long as the service qualifies for coverage. Once you reach your plan’s out-of-pocket maximum, you typically pay nothing for in-network, covered services until the new plan year.
“Let’s say you have an outpatient procedure scheduled for next year — maybe it makes more sense to push it to 2025 before the plan resets on Jan. 1,” said certified financial planner Bill Shafransky, senior wealth advisor at Moneco Advisors in New Canaan, Connecticut.
Measure medical expense tax deduction eligibility
There tax deduction Although it comes with parameters for healthcare expenses that prevent many taxpayers from using it.
For starters, you can only deduct health care expenses that exceed 7.5% of your adjusted gross income.
Additionally, you must itemize your deductions instead of the standard deduction, which is $15,750 for individual tax returns for 2025 and $31,500 for married couples filing jointly. In other words, this may be a high hurdle to clear. Next year, these amounts will be $16,100 and $32,200, respectively.
IRS data shows most taxpayers do not provide details.
But if you’re close to qualifying, there may be another reason to take time out to schedule health appointments and procedures this year rather than waiting until 2026.
“Take the time to figure out whether your healthcare expenses are deductible this year,” said Paul Penke, CFP, client portfolio manager at Ironvine Capital Partners in Omaha.
Also note that expenses covered by funds from flexible health spending accounts or health savings accounts, both of which are already tax-advantaged, are not included in the deduction.
Spend your FSA balance
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If you have an FSA, which allows you to save pre-tax money to use for qualified medical expenses, contributions generally use it or lose it clause at the end of the year. The maximum contribution to an FSA will be $3,300 in 2025 and $3,400 in 2026.
But it’s worth finding out what your employer’s rules are. Some offer up to an extra 2.5 months to spend your balance on eligible costs or allow you to transfer a certain amount up to $660 this year.
Let’s say you need to use the money before December 31st. In this case, there are many ways to spend the money, from doctor and dentist appointments to prescription and over-the-counter medications and other qualified healthcare services and devices.
“I’ve seen people in the first year of having FSA who didn’t realize they either use it or lose it,” Shafransky said. “They had a rude awakening when they saw their money was gone.”
Maximize your HSA
This means that whatever you set aside in an HSA (plus any growth if your money is invested) can stay there for as long as you want. Their earnings grow tax-free and S.o withdrawals as long as the funds are used for qualified medical expenses.
“You can also treat your HSA as a hybrid retirement account,” said Benjamin Daniel, CFP, a financial planner at Money Wisdom in Columbus, Ohio.
“If you pay expenses out of pocket and create a simple system to keep your bills, you can let the funds grow and pay you back later,” Daniel said.
Once you turn 65, you can use the funds for non-qualified medical expenses, but you’ll pay taxes on withdrawals. Before that age, You will owe a 20% penalty In addition to taxes if you use HSA money for non-qualified medical expenses.
These accounts are used only with what are called high-deductible health plans. This year the HSA contribution limit is $4,300 for individuals and $8,550 for families. In 2026, the cap will be $4,400 for individuals and $8,750 for families. If you are 55 or older and not enrolled in Medicare, you are allowed to contribute an additional $1,000.
The more you contribute, the lower your taxable income will be, whether you use the money for existing medical expenses or let your balance grow.
If you have an HSA and your annual contributions haven’t yet reached the maximum, you have more time than you think to make it happen: The deadline for 2025 contributions is April 15, 2026.
