When you or someone in your household is dealing with medical issues, you may find it necessary to make changes in your home to accommodate their health-related needs. Unfortunately, even simple adjustments can add up to major costs. That’s why the IRS offers tax deductions for medically necessary home improvements.
Who Can Benefit?
The IRS has several parameters they consider to determine if a home improvement is medically necessary. First, they factor in the intended beneficiary of a particular home improvement.
In order to deduct the cost of making or maintaining a change to your home, the person benefitting must be you, your spouse, or another member of your permanent household. In other words, any change must be made to help someone who lives in your home full-time.
In addition to taking into account the intended beneficiary of a home improvement, you must also establish that any changes you make assist someone in your household for medical reasons. Home improvements made primarily for aesthetic or cosmetic reasons do not count.
Medically necessary renovations often address wheelchair accessibility, support for residents with limited mobility, and provisions for proactive safety equipment. These may include:
- Grading the exterior property to improve access
- Widening doorways and hallways
- Constructing or installing ramps
- Modifying stairways or installing lifts
- Adding railings, support bars, or grab bars
- Lowering or modifying storage areas, electrical outlets, or kitchen equipment
Typically, you can deduct the cost of making these changes, as well as any ongoing costs related to maintenance or repair. As long as any changes you make are specifically related to a resident’s medical needs, you can deduct what you spend.
The Fine Print
There is one major caveat to deducting the cost of medically necessary home improvements on your taxes: You must factor in any change to the value of your home.
In many cases, there won’t be a change in the value of your property based on improvements made. Installing safety bars in a downstairs bathroom, for example, probably won’t increase the value of your home. However, if you make extensive changes, or if you install expensive equipment, there may be an increase in value that you must take into account.
In order to stay on the right side of the tax code, it is prudent to assess the value of your home both before and after any medically-related home improvements. If the value of your home increases based on changes you make, you have to subtract the amount of that increase from the cost of the improvement before you deduct anything. In other words, the IRS does not allow you to benefit twice if the changes you make increase the value of your home.
To find out more about deducting the cost of medically necessary home improvements, contact the tax experts at Pro Tax Resolution today! We are your resource in Virginia Beach for expert tax advice, IRS guidance, and tax filing.