Why is itemizing with 20000 in medical expenses not yielding a bigger refund than the single standard deduction?

[leeleses]

I'm working up a test case for my 2026 taxes using TT Deluxe 2025.

I retired at the end of 2025.

My income is simple:

1099-SSA    35000

1099-R qualified pension 12000

Total income 47000

TT says I'm owed the full 10% of taxes withheld back.  4700

My unreimbursed 2026 medical expenses for 2026 is at least 20000. 

Why does TT say a 20000 deduction still gives me the same refund of 4700 as the standard single deduction of 15750 would?

Also, why is TT saying I don't owe ANY Federal taxes and refunding the entire 10% / 4700 withheld?

[VolvoGirl · Accepted solution]

 You  don't owe any income tax on your income.   The most you can get back is the amount of federal tax withholding.  You probably don't qualify for any of the refundable credits like the EIC.    

[leeleses]

That's INSANE to have 20000 in medical expenses out of pocket with only 47000 income!

Only thing that may help a little is I'm eligible for Medicare soon.

[VolvoGirl]

And You can only deduct the amount of unreimbursed Medical Expenses you actually paid over 7.5% of your AGI. So it might take a lot to be worth entering. And then all your itemized deductions have to be more than the standard deduction to get any benefit (so you would only be getting the benefit of the amount that puts you over the standard deduction). 

For 2026 NEXT YEAR the standard deduction amounts are:

Single 16,100 + 2,050 for 65 and over or blind (18,150)

HOH 24,150 + 2,050 for 65 and over or blind (26,200)

Joint 32,200 + 1,650 for each 65 and over or blind (33,850/35,500)

Married filing Separate 16,100 + 1,650 for 65 and over or blind (17,750)

[VolvoGirl]

Also your SS might not be taxable.  Only up to 85% of Social Security becomes taxable when all your other income plus 1/2 your social security, reaches:

Married Filing Jointly: $32,000

Single or head of household: $25,000

Married Filing Separately: 0

So if you want abigger refund then have more tax withholding taken out of your pension.  

[Mike9241]

Of your social security benefits, only about $2200 is includable in adjusted gross income. This makes adjusted gross income about $14,200. The standard deduction of $16,100 (single) for 2026 + $1,650 if 65 or older + $6,000 senior deduction reduces taxable income and your income taxes to zero, so itemizing will not save you anything. However, if you have charitable contributions, it might be worth itemizing because unused amounts are carried forward. There is no carry-forward for unused medical expenses. There doesn't appear to be any refundable credits in your situation, so all you can get back is the taxes you prepaid. If the income projection is accurate, you may want to consider not prepaying anything for 2026. Why make the IRS an interest-free loan? It's up to you. 

 (this does not work if e) were to be more than $9000

shortcut calculation of taxable social security benefits

a) 1/2 of your social security benefits = $17,500

b) other taxable income  = $12,000

c) total $29,500

d) single filer base $25,000

e) excess $4500

f) taxable 1/2 = $2250

[leeleses]

I really appreciate both or your responses.

I figured out that the 2026 standard deduction will be 16,100.

I also realized my Aetna premiums are about 14,400, and the out of pocket maximum for the Aetna policy is 4000.  Sadly, I see myself easily spending the 4000, then they cover 100% of your medical claims for the year after that.  So that comes to 14400 + 4000 = 18,400.

I can also itemize about 1500 more for acupuncture treatments.

So itemized deductions is showing as like 19000 and if I use funds from my traditional IRA account and have to pay the taxes it reduces my refund from 4700 to 1500.

That might be worth considering paying more taxes now before the tax rates go up in future years?

Thoughts?

[VolvoGirl]

Just remember you can only deduct medical that is OVER 7.5% of your AGI.   So that will reduce your Medical deduction.    And then you would only be getting the benefit of the amount of itemized deductioins that puts you over the 16,100 Standard Deduction.

[NCperson]

@leeleses only the medical costs that exceed 7.5% of your income (line 11) can be deducted. 

On $47,000 of income which includes $35,000 of SS income, it won't matter.  Only $2,250 of your SS is considered taxable income, so the total adjusted gross income is $14,250. Since that is less than the standard deduction, there is no tax in any event.  Itemizing is not going to change the result. 

[leeleses]

See if this makes sense to you?

My tax If I take 14400 from Roth the tax burden is less than 15750 and I get a full refund of the 4700 withheld and only roughly 2500 of the SS is taxed, just like you said.

If I itemize as shown, taking 14400 from the trad IRA instead of the Roth, I only get back 1500 but pay the taxes now on the 14400.   #4 17,384 is the itemized number if I have like 21000 in medical deductions.

These are rough numbers.

If I take 14400 from Roth I should probably stop withholding taxes from the SS monthly.

[NCperson]

@leeleses the screen shot you provided is 2025, right?  your 2026 income will look very different since you state you retired.   While $13, 683 of your social security was subject to tax in 2025, only $2250 will be subject to tax in 2026 - because your total income dropped. 

here is how 2026 would look: 

Line 5b: $12,000  (pension)

Line 6a: $35,000 (gross social security)

Line 6b: $2,250 (social security subject to tax)

Line 11a: $14,250 (adjusted gross income)

Line 12e: $16,100 (standard deduction)

Line 15: $-0-  (taxable income: line 11a - Line 12e)

Line 24: $-0- (tax)

itemizing doesn't do anything.

If fact, based on what you have provided, you would not be required to file a federal tax return since your AGI is less than the standard deduction (and assuming no marketplace medical coverage, you are not working and eligible for EITC, any self-employment income is below $400, and no withholdings).

[leeleses]

Sorry, I should have explained better.  The screenshots are from a test case I worked up for 2026, using TT 2025.

The test shows the numbers with about 35000 social security and I think like 25000 of taxable income from my pension + 14400 cashed out from my trad IRA.  With like 21000 itemized medical expenses, minus the 7.5% the deduction comes to like 17-18000.

[JamesG1]

Your test case now lists pension of $25,000.  Only $11,725 of the Social Security is taxable.  

Your adjusted gross income is $36,725 and your standard deduction today is $15,750.  

The standard deduction may go up in 2026 if you become 65 years old.  You may also qualify for the $6,000 Senior Deduction when you turn 65 years old.

Medical expenses of $20,000 generate a Schedule A of $17,246.  Additional itemized deductions will decrease your tax burden and increase your Federal refund.

Tax of $2,099 and Federal refund of $2,601 if Federal withholding is $4,700.

@leeleses 

[VolvoGirl]

@leeleses   Are you including the 14,400 IRA cash out in the 25,000 pension amount on line 5b?  IRA goes on line 4a and 4b.   So it  you add the IRA withdraw that may change a lot.

Also how old will you be in 2026 (on 12/31/26)?   If you are 65 or older you will get an Extra 6,000 Senior Deduction in addition to the Standard or Itemized Deductions.  

For 2026 NEXT YEAR the standard deduction amounts are:

Single 16,100 + 2,050 for 65 and over or blind (18,150)

Are you using the Desktop program?  Desktop has a What-If worksheet that uses 2026 tax rates that you can play with.

[leeleses]

Again, I really appreciate your interest!

I will be 61 in October 2026.  I became eligible for Social Security disability at age 60 so at 62 I'm going be able to get Medicare. 

I'm using the desktop program.  Thank you for mentioning the 2026 worksheet.  I checked 2026 and copied my data into column 2.  In my scenario it seemed to increase my refund from 1501 to 1511.  Not much change?

And the answer your question, I'm having trouble getting it to do it in the step-by-step putting the 14400 IRA in the right spot.  I'm going to  try doing it in the forms view on lines 4a and 4b.  My actual pension income is only about 11,484 so that 25,584 is including the 14400 IRA money.

UPDATE: By checking the IRA/SEP/Simple box the 14400 moved to line 4b on the return.  The refund didn't change from that.   Are you able to explain why that might change the refund in some situations?

Thank you!