When you qualify for medical deductions
Can you claim a tax deduction for a home improvement? It is not as crazy as it sounds. It may be possible to write off part of the cost of a home improvement needed for medical reasons. However, be forewarned that there are significant tax obstacles to overcome.
Background: Under current law, your annual deduction for medical and dental expenses is limited to the amount of unreimbursed qualified expenses exceeding 10% of your adjusted gross income (AGI). Prior to 2013, the limit was 7.5% of your AGI for all taxpayers, but the 7.5%-of-AGI threshold has been retained through 2016 only for individuals age 65 or older. Regardless of your age, it is critical to count every last medical expense that may help you clear the return.
To qualify as a deductible medical expense, the cost must be incurred primarily for the prevention or alleviation of a physical or mental defect or illness. Conversely, an expense that is merely beneficial to your general health or well-being is not deductible. For example, if you build an inground pool in your backyard for your children’s pleasure, no deduction is allowed—even though it provides a location for valuable exercise.
On the other hand, you can deduct a portion of the cost attributable to a swimming pool if you or your spouse will be using the pool to alleviate arthritis or some other specific illness. For a medically necessary improvement made by a homeowner, the deductible amount is equal to the cost above the resulting increase in the home’s value. In addition, annual maintenance costs qualify for the deduction. The full cost of any qualified improvements, plus maintenance costs, is deductible by tenants.
Some other common examples of home improvements that may be deductible as medical expenses are air conditioning installed to alleviate a child’s asthma, an elevator constructed for an adult with a heart condition and special modifications for a disabled person.
It is generally recommended that you obtain a written appraisal from an independent real estate expert establishing the increase in your home’s value due to the home improvement. Also, if a physician prescribes a home improvement to alleviate a medical condition, be sure to retain a written copy of the statement.
This is only a general overview of a potential medical deduction for home improvements. Tax benefits may be realized in certain other respects. Consult your tax adviser concerning your personal situation.