Total medical expenses for the year must be reduced by all reimbursements for medical expenses that are received from insurance, Medicare payments and other sources during the year. Although a policy may provide reimbursement only for certain specific medical expenses, the amounts received from that policy must be used to reduce total medical expenses, including those it doesn't reimburse.

Reimbursement Received in a Later Year - If reimbursement is received in a later year for a medical expense deducted in an earlier year, report as income the amount received from insurance or other sources that is equal to, or less than, the amount previously deducted as medical expenses. However, do not report as income the amount of reimbursement received up to the amount of the medical deductions, which did not reduce taxes for the earlier year. IRS Pub 525 provides worksheets that are useful for figuring the amount of the medical reimbursement or other itemized deduction recoveries that may be taxable.