Manny, age 57, developed a severe heart condition, and his physician advised him

Question

Manny, age 57, developed a severe heart condition, and his physician advised him to install an elevator in his home. The cost of installing the elevator was $15,000, and the increase in the value of the residence was determined to be $5,800. Manny’s AGI for the year was $52,000. a. How much of the expenditure can Manny deduct as a medical expense? (take into consideration the 10% AGI limitation). b. Assume the same facts as in part a., except that Manny was paralyzed in an automobile accident and the expenditures were incurred to build entrance and exit ramps and widen the hallways in his home to accommodate his wheelchair. How much of the expenditure can Manny deduct as a medical expense? (take into consideration the 10% AGI limitation).

Explanation / Answer

A capital improvement that ordinarily would not have a medical purpose qualifies as a medical expense if it is directly related to prescribed medical care and is deductible to the extent that the expenditure exceeds the increase in value of the related property. The medical expense deduction is $4,000 [($15,000 – $5,800) – ($52,000 × 10%)].

The full cost of certain home-related capital expenditures incurred to enable a physically handicapped individual to live independently and productively qualifies as a medical expense. Qualifying costs include expenditures for constructing entrance and exit ramps to the residence, widening hallways and doorways to accommodate wheelchairs, installing support bars and railings in bathrooms and other rooms, and adjusting electrical outlets and fixtures. These expenditures are subject to the 10%-of-AGI floor only, and the increase in the home's value is deemed to be zero. Manny's deduction is $9,800 [$15,000 – ($52,000 ×10%)].

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