If someone who lives in your household has a medical condition, you may find that you need to make changes to your home in order to make it safe and accessible. Even making small changes can add up quickly, though, which is why the IRS allows you to deduct the cost of medically necessary home improvements on your taxes.
What Constitutes “Medically Necessary?”
The definition of a “medically necessary” home improvement is intentionally broad since there are so many possible scenarios to consider. Ultimately, the determination comes down to intention: If the main purpose of a modification to your home is to help a household member who has a medical condition, it’s deductible. If the purpose is aesthetic or otherwise not directly related to assisting with a medical condition, it’s not deductible.
Common Medically-Related Changes
The following list outlines the types of home improvements that usually fall under the category of “medically necessary”:
- Accommodations for wheelchairs: installing ramps, widening doorways and hallways
- Installing safety features like handrails and grab-bars throughout the home
- Moving household features, such as kitchen equipment and outlets, to be accessible from a wheelchair or other modified position.
Basically, any changes that address safety, accessibility, and mobility are considered medically necessary.
Considering Home Value
In addition to intention, the IRS also takes into account any change to the value of your home. If you make a modification for medical reasons and it increases the value of your home, you may not be able to deduct the cost. In the eyes of the government, the increase in value has already paid you back for any money you spent. If they allowed you to also deduct the cost of the home improvement, you’d benefit twice from the same thing.
It’s advisable to assess the value of your home before and after any major home improvement. If your home increases in value, you must subtract the cost of the home improvements from the amount of the increase. If the result is zero or a positive number, you cannot deduct any costs. If the number is negative (i.e. if the cost of the modification is greater than the increase in value), that difference is what you can deduct.
If you need more information about deducting the cost of medically necessary home improvements, contact the tax pros at Taxation Solutions, Inc. We’re your resource in Cincinnati for all things tax-related, from advice, to preparation, to filing. If you have a tax query, give our team a call today!