Thursday, August 16 2012
With tax deduction limits coming for 2013, medically related home upgrades are a smart project this year.
What a difference year makes.
For the 2012 tax year, you can take a tax deduction on medically necessary home improvements — like installing a wheelchair ramp and other projects that make life easier for an ill or injured family member — if you:
Starting in 2013, if you’re under age 65, you can’t take the tax deduction on medical expenses until you spend 10% of your AGI. But if you’re 65 or older in 2013, you can stick with the 7.5% AGI tax deduction threshold through the end of 2016.
The rules for tax deductions on medical home improvements are tricky:
1. Start with what it costs to modify your home.
How it works
Say you’re 45 years old and spend $20,000 to put a bathroom on the first floor of your home because your husband can’t climb stairs anymore. Your AGI is $100,000. A REALTOR® says the bathroom adds $10,000 to the value of your house.
1. Start with the cost of the improvements: $20,000
So if you itemize, you can take a $2,500 deduction for the 2012 tax year. Wait until 2013 and you get no deduction because your threshold rises to 10%. If you’re over age 65, though, you can claim a $2,500 deduction.
Tip: Doing all your improvements in a single year will help you meet the AGI threshold.
Some of the improvements that you can claim a tax deduction for, according to IRS Publication 502, “Medical and Dental Expenses”:
Will the tax change encourage you to make necessary changes this year?
Read more: http://www.houselogic.com/blog/tax-deductions/medical-tax-deduction-changes-2013/#ixzz23dg4PbL4