Air pollution, particularly ambient fine particulate matter (PM2.5) pollution, poses a significant risk to public health, underscoring the importance of comprehending the long-term impact on health burden and expenditure at national and subnational levels. Therefore, this study aims to quantify the disease burden and healthcare expenditure associated with PM2.5 exposure in Taiwan and assess the potential benefits of reducing pollution levels. Using a comparative risk assessment framework that integrates an auto-aggressive integrated moving average model, we evaluated the avoidable burden of cardiopulmonary diseases (including ischemic heart disease, stroke, chronic obstructive pulmonary disease, lung cancer, and diabetes mellitus) and related healthcare expenditure under different air quality target scenarios, including status quo and target scenarios of 15, 10, and 5 μg/m3 reduction in PM2.5 concentration. Our findings indicate that reducing PM2.5 exposure has the potential to significantly alleviate the burden of multiple diseases. Comparing the estimated attributable disease burden and healthcare expenditure between reference and target scenarios from 2022 to 2050, the avoidable disability-adjusted life years were 0.61, 1.83, and 3.19 million for the 15, 10, and 5 μg/m3 target scenarios, respectively. Correspondingly, avoidable healthcare expenditure ranged from US$ 0.63 to 3.67 billion. We also highlighted the unequal allocation of resources and the need for policy interventions to address health disparities due to air pollution. Notably, in the 5 μg/m3 target scenario, Kaohsiung City stands to benefit the most, with 527,368 disability-adjusted life years avoided and US$ 0.53 billion saved from 2022 to 2050. Our findings suggest that adopting stricter emission targets can effectively reduce the health burden and associated healthcare expenditure in Taiwan. Overall, this study provides policymakers in Taiwan with valuable insights for mitigating the negative effects of air pollution by establishing a comprehensive framework for evaluating the co-benefits of air pollution reduction on healthcare expenditure and disease burden.