Tax Deductions for Home Modifications

Dear Jane,

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. 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?

George
Duluth, MN

Dear George,

Your question comes at a very appropriate time as we say good-bye to 2006 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: Medical & Dental Expenses

Costs incurred to implement accessibility modifications in your home are an eligible 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 a dependent. The cost of permanent improvements that increase the value of your property (such as an elevator) may be partly included as a medical expense. Take the cost of the improvement and reduce it by the increase in the value of your property…the difference is a medical expense.

In many cases, improvements that make your home accesssible (accommodating a disability) will not increase the value of the home; these costs can be included in full as medical expenses. Such 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 renter 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. On his taxes, John can include in medical expenses the entire amount he paid.

Call the IRS with your federal tax questions at 1-800-829-1040; TTY, 1-800-829-4059, or visit www.irs.gov. To order federal tax forms, instructions, and publications, call the IRS at 1-800-829-3676; TTY, 1-800-829-4059 or visit www.irs.gov/formspubs.

MN Sales 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, along with 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/taxes/forms/st11p.pdf or call the Minnesota Department of Revenue at 651-296-6181; or TTY at 711 Minnesota Relay.

I hope this information is beneficial to you.

Note: The information contained in this article, extracted from federal and state Web sites, is for general guidance only. You should get appropriate professional advice on your particular circumstances, because tax laws and regulations undergo frequent change.

Do you have a question for Jane? We’ll cover all of your questions in future issues of Home Access Answers. Please contact us at 952-925-0301, www.accessibilitydesign.com, info@accessibilitydesign.com.

Jane Hampton, president of Accessibility Design, founded the company in 1992 to enhance lives through design and project management. They provide design, consultation, project management, and product recommendation services specializing in home access for individuals with disabilities at all stages of life.

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