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Understanding the medical expense deduction for home improvements

[1]According to the Family Caregiver Alliance, approximately 79% of people who require long-term care live in their homes. As such, modifications to make homes more accessible, safer, or capable of addressing specific health issues are necessary—and many individuals making these improvements may qualify for valuable home improvement medical expense deductions.

Under Sec. 213(a), the Home Improvement Medical Expense Deduction allows taxpayers to deduct expenses paid during the tax year for medical care of the taxpayer, the taxpayer’s spouse, or a dependent (as defined in Sec. 152), as long as the expenses are not compensated for by insurance or otherwise and to the extent that the expenses exceed 10% of the taxpayer’s adjusted gross income.

The costs of home improvements and special equipment may qualify for a medical expense deduction. Qualifying expenses include obvious items such as constructing an accessible entrance ramp, installing a lift, widening doorways to accommodate a wheelchair, and attaching grab bars and handrails.

A medical expense deduction for a home improvement is reduced to the extent the improvement increases the value of the related property. Therefore, an appraisal of the value of the home should be obtained before and after the improvements are completed. Some improvements may improve a home, while others might actually diminish value (e.g., a ramp at the front entrance).

In Rev. Rul. 87-106, the IRS ruled that the following expenditures “generally do not increase the fair market value (FMV) of a personal residence and thus generally are eligible in full for the medical expense deduction when made for the primary purpose of accommodating a personal residence to the handicapped condition of the taxpayer, the taxpayer’s spouse, or dependents who reside there”:

To take advantage of the deduction, the taxpayer must demonstrate how the expenditure relates to his or her medical care. While a letter from a physician is recommended, the regulations do not require it. Many websites provide information to help those facing health challenges and excerpts from these websites that discuss home modifications may be useful.

For more information on qualifying home improvement medical expenses, contact a ShindelRock tax professional [2] today.



http://www.thetaxadviser.com/issues/2016/dec/medical-expense-deduction-home-improvements.html?utm_ [3]