Make the most of health care expenses before end of year

As health-care costs continue to climb, you may want to make sure you’re not leaving valuable tax breaks or pre-tax dollars on the table this year.

Rising premiums, steeper deductibles and higher out-of-pocket maximums have put more pressure on household budgets, making year-end planning important, experts say.

Among employer-based plans — which cover about 154 million people under age 65 — premiums paid by workers could rise by 6% to 7% on average in 2026, according to consultancy firm Mercer. For plans purchased through the Affordable Care Act marketplace, premiums will more than double next year — on average, by 114% — if enhanced premium tax credits expire at the end of the year as scheduled, according to the Kaiser Family Foundation, a health policy research group.

While medical expenses often are unpredictable and unwelcome, there may be strategies you can use to make those outlays a little less painful.

Here’s what to know.

Your deductible is the amount you pay in a year for your medical costs before your plan starts paying for covered services. Your out-of-pocket max is the limit on your total cost-sharing for the year, including co-pays, co-insurance and deductibles.

Once you’ve met your plan’s deductible, as long as the service qualifies for coverage, the amount you pay would be less than it was before you reached your deductible. Once you’ve hit your plan’s out-of-pocket max, you typically pay nothing for in-network, covered services until the new plan year.

“Say you have an outpatient procedure planned for next year — maybe it makes more sense to pull it into 2025 before the plan resets Jan. 1,” said certified financial planner Bill Shafransky, senior wealth advisor for Moneco Advisors in New Canaan, Connecticut.

There is a tax deduction for medical expenses, although it comes with parameters that prevent many taxpayers from using it.

For starters, you can only deduct health-care expenses that exceed 7.5% of your adjusted gross income.

Additionally, you’d need to itemize your deductions instead of taking the standard deduction, which for 2025 is $15,750 for individual tax filers and $31,500 for married couples filing jointly. In other words, that can be a high hurdle to clear. Next year, those amounts will be $16,100 and $32,200, respectively.

Most taxpayers do not itemize, IRS data shows.

However, if you are close to qualifying, the break can be another reason to schedule health appointments and procedures this year rather than wait until 2026.

“Take the time to understand if your medical expenses may be deductible for the year,” said CFP Paul Penke, client portfolio manager at Ironvine Capital Partners in Omaha.

Also, keep in mind that expenses covered by funds from health flexible spending accounts or health savings accounts — both of which already are tax-advantaged — are excluded from counting toward the deduction.

If you have an FSA — which lets you save pretax money to use for qualified medical expenses — contributions generally come with a use-it-or-lose-it provision when the year ends. The 2025 maximum contribution to an FSA is $3,300, and for 2026, it’s $3,400.

But it’s worth finding out what your employer’s rules are. Some offer a grace period of up to 2.5 extra months to spend your balance on eligible costs, or allow you to carry over a set amount, up to $660 this year.

Suppose you need to use the money before Dec. 31. In that case, there are many ways you can spend it, from doctor and dentist appointments to prescription and over-the-counter medications, as well as a host of other qualifying health care services and devices.

“I have seen people in the first year of having an FSA not realize it was use it or lose it,” Shafransky said. “They’ve had rude awakenings to see their money is gone.”

HSAs are similar to FSAs in that they let you save pretax money to use on qualifying medical costs. However, you can leave the money there for as long as you want — it is not use-it-or-lose-it.

That means whatever you sock away in an HSA — plus any growth if your money is invested — can sit there for as long as you want it to. Its gains grow tax-free, and so are withdrawals, as long as the funds are used for qualifying medical expenses.

“You could also treat your HSA as a hybrid retirement account,” said CFP Benjamin Daniel, a financial planner with Money Wisdom in Columbus, Ohio.

“If you pay for expenses out-of-pocket and create a simple system to save your receipts, you can allow the funds to grow and reimburse yourself later,” Daniel said.

Once you turn 65, you can use the funds for non-qualified medical expenses, but you’ll pay taxes on the withdrawals. Before that age, you’d owe a 20% penalty in addition to taxes if you use HSA money for non-qualified medical expenses.

These accounts are only used in conjunction with so-called high-deductible health plans. This year, the HSA contribution limit is $4,300 for individual coverage and $8,550 for families. In 2026, the cap will be $4,400 for individuals and $8,750 for families. If you’re age 55 or older and not enrolled in Medicare, you’re allowed to contribute an additional $1,000.

The more you can contribute, the lower your taxable income will be, whether you use the money on current health care expenses or you let your balance grow.

If you have an HSA and haven’t maxed out on your annual contributions, you have more time to get it done than you may think: For 2025 contributions, the deadline is April 15, 2026.