Last week, I shared the tax benefits associated with having a home office. This week, I’ll share another way to reduce your tax burden: if you have a medical condition that requires upgrades to your home, you may be able to write off part of the cost of those upgrades.
Before I go on, I must give my usual disclaimer: I am not an accountant. Before you make any decisions to improve your tax situation, discuss them with a tax professional. This is intended as a primer for the discussion with your accountant, not as an absolute plan of action. And now, back to the subject at hand.
Uncle Sam may help pay for some home improvements to accommodate a medical condition. To the degree that the improvements increase the market value of the house, you cannot claim them as a tax write-off; however, any expense associated with upgrading your home based on doctor’s orders that isn’t reflected in increased market value can sometimes be written off.
For example, if you build a wheelchair ramp or make other changes in an effort to make your house more wheelchair accessible, those costs are likely tax deductible because ADA-accessibility typically does not increase the overall market value of a house.
Sometimes the changes may be small. Do you need to add an outlet for your CPAP machine? How about a hepafilter for your heating and cooling system? As long as you have a letter from your doctor detailing the medical need for these changes, the IRS should give you a break.
Sometimes the change may be big. What if you had a condition that required regular, extensive, low/non-impact exercise such as swimming? Let’s say you recently underwent heart bypass surgery, for example. Sounds to me like you need a swimming pool. Ideally, when the dust settles, you should be able to expense the cost of the pool, future pool maintenance, and the utilities associated with pool upkeep to the extent that the cost of the pool doesn’t increase the value of the home. As counter-intuitive as it seems and as expensive as they are, pools rarely increase the value of residential properties very much.
Am I going out on a limb here? Maybe, but if you have that letter from your doctor, I’d share it with your accountant and see whether there’s a pool in your future. A pool would definitely increase your ability to exercise, not to mention providing a wonderful place for your kids to play all summer. And heck, if you’re going to put a pool in anyway, why not see if Uncle Sam will foot part of the bill? And if you recall last week’s article about home office write-offs, once you’ve got the pool, you can invite your employees to your home for a company party and charge your business a pool rental fee.
As long as you follow the letter of the law and your accountant’s advice, the IRS will typically go along.
If you have questions about getting into real estate, please contact me at firstname.lastname@example.org or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 40 years.