Phillip, age 66, developed hip problems and was unable to climb the stairs to reach his second-floor bedroom. His physician advised him to add a first-floor bedroom to his home. The cost of constructing the room was $32,000. The increase in the value of the residence as a result of the room addition was determined to be $17,000. In addition, Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair. Phillip's AGI for 2014 was $100,000. How much of these expenditures can Phillip deduct as a medical expense in 2014?

Question

Quizplus · Accepted Answer

The cost of constructing the first-floor bedroom ($32,000) cannot be deducted as a medical expense. However, the cost of the entrance ramp ($5,500) and the hallway widening ($8,500) can be deducted as medical expenses because they are improvements to the home that are specifically for medical purposes. Therefore, the total medical expenses that can be deducted are $14,000 ($5,500 + $8,500). However, because Phillip's AGI is $100,000 and the medical expense deduction is subject to a 10% AGI floor, only medical expenses that exceed $10,000 ($100,000 x 10%) can be deducted. Therefore, the deductible medical expenses are $14,000 - $10,000 = $4,000. Since the increase in the value of the residence as a result of the addition ($17,000) must be subtracted from the deductible medical expenses, the final answer is $21,500 ($4,000 - $17,000).

Phillip, Age 66, Developed Hip Problems and Was Unable to Climb