Can I deduct medical expenses on Arizona state income tax forms?

[DanielV01 · Accepted solution]

Yes, provided you are itemizing tax deductions on your Arizona return.  While Medical expenses must reach 7.5% of your income to be deductible (as part of itemized deductions) on your Federal return, medical expenses are 100% deductible in Arizona, provided that you itemize your Arizona deductions.

[ad7gu]

turbotax filled out the az form 140. is this the itemized deduction form? if so, what line does my medical deduction show up on. if not, what is the form number for the itemized deduction?

[MarilynG1]

@ad7gu Make sure you entered your Medical Expenses in your Federal Return.  Then in the Arizona return, as you navigate through it, you will see a screen headed "Itemize Deductions". Answer "yes" to the question of "Do you want to itemize Arizona deductions?" The next screen is Medical and Dental Expenses where you can enter the net expenses.

This creates a Schedule A in your Arizona return.

Click this link for more info on Arizona Itemized Deductions.

[Tsmayfield44]

Can I write off medical expenses that were paid with an HSA account on my state taxes in AZ?

[JohnW152]

No, you can’t.  

Since these funds were already tax-free to you – that is, they weren’t included in your income during the tax year you made your contributions – deducting them would amount to double-dipping. 

@Tsmayfield44

[clemcat1]

URGENT:

I prepared my AZ return using Turbotax.  However, even though I said I wanted to itemize for AZ regarding the medical and charitable contributions, the final form did not show anything for my listed medical expenses in 2023.  Is there a flaw in the program for AZ state filing documents within Turbotax?  I looked at last year's return and saw that I did not receive anything on medical then either.  

Please advise URGENTLY.  Tax day is tomorrow, 4/15 and I need to get this filed.

Thanks,

Cathy

[DaveF1006]

It depends. If the standard deduction is greater than your total itemized deduction, the program will default to the standard deduction amount. If you are using the Turbo Tax software, you can manually change this on the AZ worksheet form and check the box that you wish to itemize even if itemize deductions are less than the standard deduction.

If am not sure why you wish to take the standard deduction on federal but itemize on your AZ return?  If you itemize on your AZ return, you will still receive a less favorable return by itemizing.

[clemcat1]

I thought that AZ allowed you to deduct 100% of your medical expenses, even if you take the standard deduction.  At least, that's what I read when I Googled it and, in the past, I believe that's what I did on my AZ returns. 

[DianeW777]

No exactly.  An individual may claim itemized deductions on an Arizona return even if taking a standard deduction on a federal return. For the most part, an individual may claim those deductions allowable as itemized deductions under the Internal Revenue Code. If claiming Arizona itemized deductions, individuals must complete and include Federal Form 1040, Schedule A, and, if applicable, an Arizona Schedule A with an Arizona return.

• Arizona Deductions and Exemptions

On the Arizona return, you do not have to reduce your medical expenses by a percentage of your federal adjusted gross income like you do on the federal return.

• AZ 140 Schedule A 

@clemcat1 

[clemcat1]

So why is the TT software not producing the 140 Schedule A so that I can deduct those medical expenses??  I answered yes when it asked if I wanted to itemize for AZ, and also completed the Schedule A itemized deductions for the federal (even though I used the standard deduction).  That should have picked up the medical expenses!  But, it did not.  There is a flaw in the software.  I will need to file an amended return at some point to correct this for 2024, 2023 and possible earlier years as well.  

[AmyC]

All of the deductions are entered in the federal part of the program. Selecting to itemize in AZ should have picked up the form.

Reference:

I need to amend my state return.

[clemcat1]

Well, I am here to tell you that it did not.  Please advise your software development area about this flaw in the AZ state tax filing setup.  I won't use TurboTax again until I am certain that this has been fixed.

Thanks,

Cathy

[az_cactus_hugr]

When I finished entering all details of medical expenses, TT asked me if all of those expenses were paid from my HSA/Cafeteria plan.  I chose yes, because I have a pre-tax HSA contribution managed by my employer, which means it's a Cafeteria plan governed accordingly.

I believe that's why it's not pulling into my AZ State plan even though I chose to deduct... because AZ140 clearly states you cannot deduct any amounts paid from a Cafeteria plan including premiums and "other expenses".  Therefore, only out of pocket expenses not paid using my HSA will count.

If your case is different, you may need to navigate back to federal, find the medical expense worksheet, and use it to copy/past the same information into the AZ form.