In Brief

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Medical tourism refers to travelling to a foreign destination for the purpose of receiving medical treatment. Americans are traveling abroad in record numbers to take advantage of cost savings associated with medical services and procedures. Medical expenses, whether incurred abroad or within the United States, may provide significant taxpayer benefits as well. The authors describe various tax considerations associated with medical tourism.

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Medical tourism is a rapidly growing, multimillion-dollar industry. Patients Beyond Borders, a comprehensive source for consumer information on medical tourism, estimates that in 2016, 1.3 million people left the United States to seek medical care in other countries. The number of medical tourists is expected to grow substantially over the next five to ten years, as taxpayers travel for popular procedures such as knee replacements, face lifts, dental care, and even open heart surgery.

Taxpayers, regardless of whether they are insured, uninsured, or underinsured, may be motivated to engage in medical tourism for many reasons, including cost savings and availability of certain drugs or treatments. For example, when insurance companies deny prescribed procedures or treatments, other alternatives for medical care may be necessary.

When taxpayers choose to have procedures that are not covered by insurance, medical tourism may be not only a viable choice, but also a preferable one. Furthermore, medical tourism may be the best option when experimental treatments or drugs are desired that are not approved for general use in the United States. While cost savings and innovative medical treatments are attractive incentives, another important element to consider is the potential tax benefits derived from incurring medical expenses abroad.

Deductibility of Medical Expenses

In general, the deductibility of medical expenses is determined without regard to where the expenses are incurred. Taxpayers who seek medical services abroad are subject to the same rules and regulations as taxpayers who seek medical treatment within the United States. There may be some important differences, however, in the types of expenses incurred by taxpayers who choose to engage in medical tourism. For example, medical tourists generally incur significant travel and lodging costs not usually associated with domestic medical treatment. Medical tourists may also need longer infacility recovery time or the assistance of an attendant caregiver to mitigate the risks of long-distance travel back to the United States immediately after treatment.

In general, taxpayers who seek medical services abroad are subject to the same rules and regulations as taxpayers who seek medical treatment within the United States.

The type and quality of medical treatments provided vary from country to country. Some treatments, therapies, or drugs administered in other countries may be considered experimental by U.S. standards. Medical facilities may also be very different from one provider or country to another, with services being performed on both an inpatient and outpatient basis. Therefore, it is important for taxpayers to be knowledgeable about the level of care and the cost of any service or procedure offered. Some overseas medical providers require significant upfront, lump-sum payments for medical services or procedures, which may be problematic when determining tax deductibility of expenses. Medical tourism companies often assign a third-party case manager, at the expense of the taxpayer, to arrange travel and locate healthcare providers in unfamiliar destinations. Alternatively, taxpayers may choose to personally travel to a particular destination in order to locate the experts and facilities best suited for a specific medical treatment. Regardless of where taxpayers travel for medical care or what kind of treatment they receive, it is important to document all related expenses.

Allowable Medical Expenses

In order to deduct the cost of medical tourism, the expenses incurred must qualify as medical expenses rather than personal or vacation expenses. To qualify as a medical expense, costs must be incurred for the diagnosis, treatment, cure, or prevention of a mental or physical illness or injury. Such costs would ordinarily be paid to a qualified hospital, clinic, or medical facility, or to a professionally qualified doctor, dentist, nurse, or medical practitioner. Expenses incurred for the overall well-being or general health of a taxpayer, such as expenses incurred to golf, do not qualify as medical expenses.

Traditional medical expenses may include, but are not limited to, the cost of equipment, supplies, medicines, and materials needed for the diagnosis, treatment, prevention, or cure of illnesses and abnormal conditions. Taxpayers are also allowed to deduct the cost of medical insurance premiums for policies that help defray the costs mentioned above. The cost of qualified long-term care services and transportation costs related to medical treatment are also deductible medical expenses. Other allowable expenses include acupuncture, annual physical exams, the cost of an ambulance when necessary, birth control pills, breast reconstructive surgery, contact lenses, crutches, diagnostic services, treatment for drug addiction, hearing aids, chiropractic care, and physical therapy (IRS Publication 502–Medical and Dental Expenses, 2016,

While the list of allowable medical expenses is quite liberal, not all costs incurred for medical care qualify. To be allowable, medical costs must be for the treatment, prevention, or cure of a diagnosed illness. The treatment should not be for the general well being of the taxpayer; for example, dancing lessons, even if recommended by a doctor, are not deductible medical expenses [Thoene v. Comm’r, 33 T.C. 62 (1959)]. Likewise, electrolysis, hair transplants, health club dues, nonprescription drugs, and nutritional supplements are generally not allowable medical expenses, as they are not a treatment for a diagnosed disease. Certain treatments, such as cosmetic surgeries, are usually not allowable unless the surgery was used to treat a diagnosed medical condition. For example, someone diagnosed with breast cancer may have reconstructive cosmetic surgery, including breast implants, which would be allowable. Under other circumstances, the same procedure would not be an allowable medical expense.

Medical tourists who seek treatment abroad will likely incur many of the same expenses as taxpayers who receive medical treatment within the United States. For example, most taxpayers who receive medical treatment, regardless of the location, will have essential expenses for doctors, hospitals, medicines, and insurance premiums. Taxpayers who travel abroad for medical treatment, however, will also incur significant transportation costs, as well as costs for lodging and meals while away from home.

Transportation expenses.

Medical tourists are allowed to deduct transportation costs incurred to obtain medical care, provided the transportation is primarily for, and essential to, such care. Transportation costs include amounts paid for trains, buses, cabs, airplanes, or an ambulance if needed. These types of transportation expenses may also be deducted for someone traveling with the person seeking medical care. For example, if a young child needs the care of a parent or an ailing adult needs the assistance of a nurse or other caregiver, additional transportation expenses are allowable deductions.

Meals and lodging.

Medical tourists who travel abroad for medical care will also need to plan for meals and lodging while away from home. The costs of meals and lodging are deductible as medical expenses when a taxpayer receives in-patient care at a hospital or other equivalent facility. Again, these types of expenses are allowed for both the person receiving treatment and a caregiver-companion if one is needed [Montgomery v. Comm’r, CA-6, 70-2 T.C. (1970)]. With respect to the necessity of a caregiver travel companion, medical tourists should acquire and keep documentation from a treating physician that indicates a travel companion is recommended as part of pre- or post-treatment care [Carasso v. Comm’r, 34 T.C. 1139, 34 T.C. 119, (1960)]. Medical tourists may also deduct the cost of lodging while not in a hospital or equivalent facility under the following specific conditions:

  • The lodging is primarily for and essential to medical care.
  • The medical care is provided by a doctor in a licensed hospital or in a medical care facility that is the equivalent of a licensed hospital.
  • The lodging is not lavish or extravagant under the circumstances.
  • There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. (IRS Publication 502)

If these conditions are met, the amount allowable as a medical expense for lodging cannot exceed $50 per night per person for up to two people (i.e., the patient and a caregiver). For example, if a medical tourist travels to Israel to receive open-heart surgery at the recommendation of his physician, he may deduct up to $100 per night for lodging for himself and a required caregiver. To deduct the lodging expenses of a caregiver, the taxpayer must actually pay those expenses; if the caregiver pays for her own expenses out of pocket, she may deduct her portion of the allowable lodging of $50 per night only if the person she is traveling with is her spouse or dependent. A taxpayer may not, however, deduct the cost of meals as a medical expense unless he is being treated in a hospital or an equivalent licensed facility.

Potential Tax Benefit

In order for a medical tourist to derive any tax benefit from medical expenses, such as those described above, the taxpayer must have allowable medical expenses that exceed 10% of adjusted gross income and must itemize. Choosing to itemize actual expenses implies that the taxpayer has qualifying expenses that exceed the standard deduction, which varies according to filing status. In 2017, a single taxpayer, or a married person filing a separate return, is allowed a standard deduction of $6,350, while a married couple filing a joint return is allowed a $12,700 standard deduction. For taxpayers who file as head of household, the standard deduction is increased to $9,350. Taxpayers who are at least 65 years old or blind are allowed additional standard deduction amounts of $1,550 for single taxpayers and $1,250 each for married taxpayers.

Medical tourists who seek treatment abroad will likely incur many of the same expenses as taxpayers who receive medical treatment within the United States.

Taxpayers cannot deduct both the standard deduction and itemized expenses in the same tax year. It is important for medical tourists to understand which costs should be included as deductible medical expenses when determining whether to itemize expenses or take the standard deduction so as to receive the maximum allowable tax benefit.


Consider Paul and Erika, married taxpayers who file a joint tax return. Erika is in her mid-50s and works a full-time job; Paul is 67 and retired. In 2017, Paul and Erika reported adjusted gross income (AGI) of $73,000. Throughout 2017, Erika and Paul spent $3,700 on doctor bills, $2,300 on medicine, $870 on hospital bills, and $3,840 in medical insurance premiums, for a total of $10,710. Paul and Erika must first reduce their medical expenses by $7,300, or 10% of their AGI; this adjustment lowers their allowable medical expense deduction to $3,410. Next, Paul and Erika must compare their remaining medical expense deduction to the standard deduction to determine which results in the most favorable tax liability. Since Paul is over 65, he and Erika are allowed to take an additional standard deduction in the amount of $1,250, bringing their total allowable standard deduction to $13,950. Comparing the standard deduction of $13,950 to Paul and Erika’s itemized deduction of $3,410, it is clear that the standard deduction of $13,950 provides the greatest tax benefit.

Now consider Christina, a paralegal in her late 30s, who will file her 2017 return as head of household, claiming her 14-year-old daughter, Brianna, as a dependent. During 2017, Christina travelled to Thailand for the sole purpose of having a knee replacement surgery at the advice of her doctor; Christina’s condition is rare and the materials used for her knee replacement have not yet been approved in the United States. Her travel costs to Thailand included airfare of $1,734, cab fares while in Thailand of $112, hotel costs of $234 for a two-night stay ordered by her doctor for recuperation, and expenses for meals of $139. Because Christina chose to use an out-of-network surgeon for her procedure, and the procedure itself was unavailable in the United States, her PPO did not cover her expenses. (Christina’s total knee replacement in Thailand cost her $17,500, while a similar procedure in the United States would have cost over $49,000.) Christina’s other medical expenses for 2017 included $973 in medicine, $728 for Brianna’s dental work, $1,647 for glasses for both of them, $1,404 for medical insurance, and $2,758 for other doctor visits and out-of-pocket lab work. Christina’s AGI for 2017 was $62,475. Her medical expense deduction is thus $26,956 (total medical expenses above) less $6,248 (10% of $62,475), or $20,708. This is greater than the allowable standard deduction of $9,350 for a head of household taxpayer in 2017; therefore, Christina should itemize her expenses and claim $20,708 in medical costs for the year in order to receive the greatest tax benefit.

Medical tourists planning to travel abroad for the purpose of medical treatment should carefully consider all of the factors involved with respect to the tax treatment of their expenses.

Paying For Medical Care Abroad

Taxpayers should know that paying for medical expenses while living or traveling abroad is vastly different from paying for medical expenses domestically. Many foreign healthcare providers do not bill insurance companies directly, and healthcare networks as they exist in the United States are practically nonexistent in foreign countries. Historically, health insurance policies issued in the United States have not covered expenses incurred abroad; however, an increasing number of insurance companies and a few progressive employers are embracing the idea of international healthcare as a viable option for U.S. workers (M.P. McQueen, “Paying Workers to Go Abroad for Healthcare,” Wall Street Journal, Sept. 30, 2008,; Anne K. Smith, “Health Care Bargains Abroad,” Kiplinger’s Personal Finance, Dec. 31, 2012,; Marcia S. Wagner, “Medical Tourism and Group Health Plans,” Journal of Compensation and Benefits, September/October 2006,

U.S. citizens living and working abroad, other than those eligible for Medicare, may want to consider funding medical care through the use of a high-deductible medical plan in conjunction with a health savings account (HSA). An HSA must be administered by a trustee, meaning that it should be set up through a bank, investment house, or brokerage firm. Contributions to the HSA are tax deductible (regardless of whether the taxpayer itemizes), earnings within the HSA are tax exempt, and distributions from the HSA are tax free, as long as they are used to pay for qualified medical expenses. Unlike other tax-favored savings accounts (e.g., flexible savings accounts), which do not allow contributions to carry over from one tax year to another, contributions to an HSA remain in the taxpayer’s account until used. Contributions to an HSA may be limited by several factors, such as the type of HSA and the number of HSAs owned, as well as the age and date of eligibility of the taxpayer.

U.S. citizens are taxed on all income worldwide; therefore, the establishment of an HSA can provide significant tax benefits in addition to effective funding for out-of-pocket medical costs. HSAs can also be used by U.S. citizens traveling abroad for the sole purpose of receiving medical care, as long as the services qualify for the treatment of medical expenses in the United States.

Plan Carefully and Document

Medical tourists planning to travel abroad for the purpose of medical treatment should carefully consider all of the factors involved with respect to the tax treatment of their expenses. Careful consideration is warranted when deciding whether these expenses would qualify as tax deductible. Taxpayers should use some rules of thumb when planning. First, they should determine if the type of expense would be allowable, independent of the location where the service is performed. Next, taxpayers should consider the provider of the care and the facilities where services will be rendered; it is important that the services be provided by professionally qualified personnel at a licensed hospital or facility. Finally, with respect to expenses for meals and lodging, it is important that such expenses are considered part of the treatment itself. As always, it is critical to keep detailed records and documentation.

Dana L. Hart, PhD, CPA is an assistant professor, at the University of North Florida, Jacksonville, Fla.
Robert Slater, PhD, CPA is an associate professor, at the University of North Florida, Jacksonville, Fla.
C. Bruce Kavan, PhD, CPA is a professor, at the University of North Florida, Jacksonville, Fla.