Some homeowners and landlords may be faced with a high cost of home improvements. Normally, they are not considered deductible on a personal tax return. However, if improvements are being made in order to accommodate medical needs, you may be able to deduct these costs.
Your accountant can help you determine if it is worth pursuing, but first there are several tax law obstacles to overcome.
Under current law, you may only deduct medical expenses in excess of 10 percent of your adjusted gross income (AGI). If you don’t clear that 10 percent for the year, you get no deduction. This is a high bar for many taxpayers.
To determine if you qualify for a deduction under Sec. 213(a), add up the unreimbursed medical expenses that satisfy the tax law requirements. An expense counts toward the 10 percent only if it’s for medical care for you, your spouse or your dependent. Conversely, an expense that is just beneficial to your general health rather than a specific health issue, or one that’s done for personal motives (e.g., architectural taste) isn’t deductible.
When a homeowner makes an improvement for medical reasons, the deductible amount is limited to the cost above the increase in the home’s value. For instance, if a $10,000 improvement increases the value of your home by $4,000, $6,000 counts to the deduction. Improvements made by tenants are fully deductible, as they don’t benefit from the increase in the home’s value.
An allergist may recommend installing central air conditioning to alleviate a child’s asthma or you might construct a bathroom on a lower floor to benefit a family member with arthritis or a heart condition. As long as a connection to the medical condition is explained, other improvements could include (but aren’t limited to):
There may also be different eligible improvements and deduction amounts for tenants making changes to a rental property, so it is important to keep records and consult with your CPA. Aesthetic and personally motivated changes to the home are not included.
Don’t leave matters to chance. If you qualify for a medical home improvement deduction, obtain a written statement from a physician prescribing the improvement, and an independent appraisal of the increase in the home’s value. Whether your own home is undergoing these improvements to accommodate family or your aging parents are implementing these modifications, inform your CPA of the plans at your annual tax planning consultation.
Contact Alloy Silverstein for additional guidance.
© MC 2017 | “Tax Tips” are published weekly to provide current tax information, tax-cutting suggestions, and tax reminders. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
Empowering business owners and individuals in South Jersey and Philadelphia to feel confident through proactive accounting and advisory solutions.
