Amount And Timing Of Deduction Medical expense deduction is only allowed to the extent qualified medical expenses exceed 7.5% of AGI During tax year reimbursements reduce allowable deductions Subsequent tax years reimbursements included in gross income under the tax benefit ruleAmount And Timing Of Deduction • Medical expense deduction is only allowed to the extent qualified medical expenses exceed 7.5% of AGI • During tax year - reimbursements reduce allowable deductions • Subsequent tax years - reimbursements included in gross income under the tax benefit rule