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House-related medical expenses

Home improvement costs are allowed as medical expenses only if:

  • Their main purpose is medical.
  • The actual cost of the improvements exceeds the increase in the fair market value of your home.

To prove the first, obtain a written statement from your doctor explaining the medical need for the improvement. To prove the second, include an appraisal of your home verifying the resulting increase in fair market value, if any.

The medical expense portion of a home improvement is calculated by subtracting the increase in fair market value from the cost of the medically necessary home improvement.

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For example, you add a swimming pool and obtain a physician's statement verifying that the pool is for therapeutic purposes. The cost of the pool is $20,000. A written appraisal indicates your home's fair market value increases by $10,000 as a result of this addition. Therefore, your medical expense portion is $10,000.

Home improvement

Cost of home improvement

Increase in home's fair market value

Medical expense portion of improvement

Swimming pool

$20,000

$10,000

$10,000

Be aware that some structural changes to your home don't increase the value of your home, making them fully deductible as medical expenses. Common examples are constructing wheelchair accessible entrance or exit ramps, widening doorways or hallways, and modifying bathrooms, stairways, outlets, fixtures, appliances, smoke detectors, and fire alarms.

-- Posted: March 15, 2000

 

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