The short answer is that expenses reimbursed tax-free, by an HSA, FSA, or insurance, must be subtracted first before you take the 7.5% limitation into account.
A longer explanation would be that the definition of deductible medical expenses must take into account the 7.5% limitation as defined in the law. In effect, all of your unreimbursed medical expenses are “eligible“, but only eligible expenses over that threshold are actually deductible. All of your unreimbursed expenses are listed on schedule A line 1, and the 7.5% limitation is calculated directly on schedule A lines 2-4. If you get a reimbursement, you can’t also include the expense on line 1 to satisfy the limitation. In other words, you are not allowed to use the HSA to defeat the 7.5% limitation.
