My daughter was injured over the summer in a car accident and now uses a wheelchair for mobility. This past fall, we had to make many structural changes to our home to accommodate the wheelchair. The cost of modifications exceeded $75,000, and based on our income we are not eligible for any grants or special funding programs. Are there any tax incentives we can benefit from to recoup some of the cost?
Your question comes at a very appropriate time as we say good-bye to 2005 and begin the yearly grind of taxes! Both the Federal Government and the State of Minnesota offer tax incentives for individuals making accessibility modifications to their home.
Federal Income Tax
Costs incurred to implement accessibility modifications in your home are an eligible medical deduction on your Federal Income Tax under “Medical and Dental Expenses.” You can deduct only the amount of medical and dental expenses that is more than 7.5% of your adjusted gross income.
You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. The cost of permanent improvements (such as an elevator) that increase the value of your property may be partly included as a medical expense. The cost of the improvement is reduced by the increase in the value of your property…the difference is a medical expense. If the value of your property is not increased by the improvement, the entire cost is included as a medical expense.
Certain improvements made to make your home accessible thereby accommodating a disability do not usually increase the value of the home and the cost can be included in full as a medical expense. These improvements include, but are not limited to, the following items:
• Constructing entrance or exit ramps for your home;
• Widening doorways at entrances or exits to your home;
• Widening or otherwise modifying hallways and interior doorways;
• Installing railings, support bars, or other modifications to bathrooms;
• Lowering or modifying kitchen cabinets and equipment;
• Moving or modifying electrical outlets and fixtures;
• Installing porch lifts and other forms of lifts (but elevators generally add value to the house);
• Modifying fire alarms, smoke detectors, and other warning systems;
• Modifying stairways;
• Adding handrails or grab bars anywhere (whether or not in bathrooms);
• Modifying hardware on doors;
• Modifying areas in front of entrance and exit doorways;
• Grading the ground to provide access to the residence.
Only reasonable costs to make a home accessible accommodating a family member’s disability are considered medical expenses. Additional costs for personal motives, such as for architectural or aesthetic reasons, are not eligible medical expenses.
Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense.
Improvements to property rented by a person with a disability are also an eligible medical expense. Amounts paid by the rentor to buy and install special plumbing fixtures for a person with a disability, mainly for medical reasons, in a rented house are medical expenses.
Example: John has arthritis and a heart condition. He cannot climb stairs or get into a bathtub. On his doctor’s advice, he installs a bathroom with a shower stall on the first floor of his two-story rented house. The landlord did not pay any of the cost of buying and installing the special plumbing and did not lower the rent. John can include in medical expenses the entire amount he paid.
To order Federal Tax forms, instructions, and publications call the IRS at 1-800-829-3676; TTY 1-800-829-4059.
Call the IRS with your Federal tax questions at 1-800-829-1040; TTY call 1-800-829-4059.
State of Minnesota Tax
Special Purchase Refund Claim
In the State of Minnesota, if you purchase a stair lift, ramp or elevator for installation at a disabled person’s principal residence, you may request a refund of the sales tax paid if the item purchased is authorized by a physician. This refund also applies to building materials used to install or construct these items.
In order to claim the refund, you must fill out Minnesota Revenue Form ST11P and attach:
• a physician’s prescription for the items purchased, and
• a copy of invoices showing sales tax paid.
For more information on the State of Minnesota “Special Purchase Refund Claim” go to: www.taxes.state.mn.us/forms/st11p.pdf or call the Minnesota Department of revenue at 651-296-6181; or TTY at 711.
Although we have researched and extracted information from the Federal and State websites, it is always recommended you check with your tax accountant if you have any additional questions.
I hope this information is beneficial to you.
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