Can You Write Off Home Improvements for Disability? Are Necessary Home Repairs Tax Deductible?
Deducting Medically Necessary Home Improvements
Individuals can claim medical tax deductions for the cost of special equipment installed in a home, or for home improvements if the main purpose is to accommodate the individual’s, spouse’s, or dependents’ medical needs.
Medically required home improvements that would not ordinarily be for medical care are deductible only to the extent the costs exceed the increase in the home’s value.
Certain home improvements made to accommodate a disabled condition do not usually increase the value of the home and the cost can be included in full as medical expenses. These improvements include, but are not limited to, the following items:
- Constructing entrance or exit ramps.
- Widening doorways at entrances or exits.
- Widening or modifying hallways and interior doorways.
- Installing railings, support bars or other bathroom modifications.
- Lowering or modifying kitchen cabinets and equipment.
- Moving or modifying electrical outlets and fixtures.
- Installing porch lifts and other forms of lifts. (Exception: Elevators generally add value to the house.)
- Modifying fire alarms, smoke detectors and other warning systems.
- Modifying stairways.
- Adding handrails or grab bars.
- Modifying hardware on doors.
- Modifying areas in front of entrance and exit doorways.
- Grading the ground to provide access to the residence.
Long-term Care Costs
Deductible medical expenses include amounts paid for qualified long-term care (LTC) services, as well as premiums paid for LTC insurance (subject to limits). Qualified LTC services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating and rehabilitative services (as well as maintenance or personal care services) that are required by a chronically ill individual and are provided under a plan of care prescribed by a licensed health care practitioner. A chronically ill individual is one who has been certified by a licensed health care practitioner within the last 12 months as:
1) Being unable to perform at least two activities of daily living (ADLs) without substantial assistance for a period of at least 90 days due to a loss of functional capacity (ADLs include eating, toileting, transferring, bathing, dressing and continence) or
2) Requiring substantial supervision to protect against safety or health threats caused by the individual’s severe cognitive impairment.
Benefits received from a qualified LTC insurance contract to pay LTC expenses are not taxable to the extent of $370 per day for 2019 or the amount of actual LTC costs, if greater.
Life Insurance— Accelerated Benefits
- Life insurance policies are normally held for the death benefits. Some insurance carriers offer benefits during the insured’s life when they are terminally or chronically ill. Insurance carriers usually refer to such benefits as “living” or “accelerated” benefits.
- Terminally ill (and within limits, chronically ill) individuals can exclude accelerated death benefits from taxable income.
- Accelerated benefits can provide a source of tax-free cash to the insured.
- A terminally ill individual must be certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months of the date of certification. A chronically ill individual has the same definition as used in connection with deducible LTC expenses.
- Favorable tax rules also apply to some viatical settlements. Viatication is the sale of a life insurance policy to someone who is buying it as an investment (that is, the buyer receives the life insurance proceeds upon the death of the insured). Viatical settlement providers generally must be licensed in the states where they do business or meet certain legal requirements.