Health, Wealth, and the IRS: A South Bend Guide to Deducting Medical Expenses

Date: Friday, November 6, 2026

Whether you are hitting your daily goal of 10,000 steps walking along the St. Joseph River, braving the Indiana winter to get to the IU South Bend campus, or just trying to stay healthy during flu season, taking care of your physical well-being is a top priority. But when health issues arise, the financial toll of medical bills can be just as stressful as the illness itself.

Fortunately, the tax code offers a lifeline: the medical expense tax deduction. However, claiming this deduction isn’t just about knowing what is deductible; it’s about understanding the procedural rules of how the IRS requires you to claim, prove, and defend these expenses.

1. The Basics: The 7.5% Threshold and the “Election”

Under current tax law, you can deduct unreimbursed medical and dental expenses that exceed 7.5% of your Adjusted Gross Income (AGI). This includes payments to local providers like Memorial Health System, Saint Joseph Health System, out-of-pocket prescription costs, and even certain travel expenses (like mileage) to get to your appointments.

The Procedural Catch: The Requirement to Elect As federal tax procedure outlines, “Itemized deductions are claimed by taxpayer election–effected by actually claiming them on the return.”

  • What this means for you: The IRS will not automatically give you this deduction. You must actively choose to itemize your deductions on Schedule A of your Form 1040. Furthermore, if your total itemized deductions (including medical, state/local taxes, and mortgage interest) do not exceed the Standard Deduction, it is procedurally more beneficial to take the standard deduction. You must run the numbers to make the “election” that saves you the most money.

2. The Audit: Proving Your South Bend Medical Expenses

If the IRS selects your return for an examination and questions your Schedule A medical deductions, the procedural burden falls on you.

  • The Burden of Proof: In tax court and IRS examinations, the taxpayer generally bears the burden of proving their entitlement to a deduction. A mere entry on a tax return is not enough.
  • Documentation is Key: You must maintain contemporaneous records. Keep your Explanation of Benefits (EOBs) from your insurance, receipts from your local South Bend pharmacies, and canceled checks or credit card statements. If you drove from your home in the 46613 zip code to a specialist in Mishawaka or Granger for treatment, keep a mileage log. Without substantiating records, the IRS will procedurally disallow the deduction.

3. The “Ripple Effect”: Partnership Audits and Your Medical Deductions

Do you own a stake in a local real estate syndicate, a small business partnership, or an investment fund? If so, you need to be aware of how partnership-level audits affect your personal medical deductions.

Federal tax procedure dictates that “automatic adjustments that flow from changes in income resulting from partnership item adjustments” will ripple down to your individual return. Because your medical deduction threshold is tied to your AGI (the 7.5% rule), if a partnership audit increases your allocated income, your AGI goes up. Procedurally, this automatically shifts your medical deduction threshold, potentially reducing or eliminating your allowable medical deduction. The IRS will computationally adjust your Schedule A based on the final partnership outcomes.

4. The Ultimate Safety Net: “Economic Hardship” for Individuals

What happens if your medical bills are so catastrophic that you not only can’t pay the hospital, but you also can’t pay the IRS the taxes you owe?

The IRS has powerful collection tools, including levies on your bank accounts or wages. However, the law provides a vital procedural shield known as the Economic Hardship Exception. The IRS defines economic hardship as a situation where, considering your unique circumstances, you are unable to pay reasonable basic living expenses.

The tax code explicitly outlines scenarios that qualify, including:

  1. A long-term illness, medical condition, or disability that renders you incapable of earning a living, where it is foreseeable that your financial resources will be exhausted providing for your care.
  2. A situation where your monthly income is exhausted by providing for the care of dependents without other means of support.

Crucial Procedural Note: The text of the law and Treasury Regulations explicitly state that this economic hardship exception applies only to individual taxpayers. Corporations, partnerships, and estates do not get this protection. If you are an individual facing a levy due to massive medical debt, you have the right to request a Collection Due Process (CDP) hearing to assert this hardship and protect your livelihood.

The Takeaway for South Bend Residents

Staying healthy is your best defense against medical debt, but when the unexpected happens, the tax code is designed to offer some relief.

To protect yourself:

  1. Track your mileage and out-of-pocket costs throughout the year, especially if you are traveling to specialized medical care outside of your immediate South Bend neighborhood.
  2. Understand the itemization election and ensure Schedule A actually benefits you over the standard deduction.
  3. Keep meticulous records to satisfy the IRS’s burden of proof requirements.
  4. Know your rights: If medical crises impact your ability to pay your tax debt, remember that the IRS “economic hardship” protections are specifically written to protect you, the individual taxpayer.

Disclaimer: This post is for educational purposes based on the Federal Tax Procedure (2026 Ed.) materials and general tax principles. Tax law is highly fact-specific. Always consult a qualified local tax professional or EA in the South Bend area regarding your specific medical and tax situation.