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Tax-deductible home remodeling

 

Dear Tax Talk,
My 92-year-old mother lives with me. It has come time to add a handicap bathroom to my home; we have only one bath and it is not feasible to remodel it. She now needs a shower that she doesn't have to lift her legs to get into, plus she needs bars to help maintain balance, etc. I am wondering if the cost of the addition could be a tax deduction for medical purposes. -- Pat

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Dear Pat,
Assuming you can claim your mom as your dependent, you may be able to claim part of the cost of the addition as a medical expense. Internal Revenue Service Publication 502 provides that you can include as medical expenses amounts you pay for special equipment installed in a home, or for improvements, if the main purpose is medical care for you, your spouse or your dependent.

The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. The cost of the improvement is reduced by the increase in the value of your property. The difference is a medical expense. If the value of your property is not increased by the improvement, the entire cost is included as a medical expense.

Certain improvements made to accommodate a home to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. These improvements include, but are not limited to, the following items.

  • Constructing entrance or exit ramps for your home.

  • Widening doorways at entrances or exits to your home.

  • Widening or otherwise modifying hallways and interior doorways.

  • Installing railings, support bars or other modifications to bathrooms.

  • Lowering or modifying kitchen cabinets and equipment.

  • Moving or modifying electrical outlets and fixtures.

  • Installing porch lifts and other forms of lifts (but elevators generally add value to the house).

  • Modifying fire alarms, smoke detectors and other warning systems.

  • Modifying stairways.

  • Adding handrails or grab bars anywhere (whether or not in bathrooms).

  • Modifying hardware on doors.

  • Modifying areas in front of entrance and exit doorways.

  • Grading the ground to provide access to the residence.

Only reasonable costs to accommodate a home to a disabled condition are considered medical care. Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses.

If the bathroom addition costs $20,000 and adds $10,000 in value to your home, you would be able to claim the remaining $10,000 cost as a medical expense. Since medical expenses are only deductible if they exceed 7.5 percent of your adjusted gross income, you may want to take the opportunity in the year of improvement to bunch your deductions by paying for other medical expenses that are not reimbursable for you and your family (i.e., dentistry or the other items listed above).

You also would want to make sure that you pay the contractor for the improvement in full in one year so that you can group the deduction in that year rather than have to spread it over two years.

 
-- Posted: Oct. 7, 2004
   

 

 
 

 

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