Diego, who is single and lives alone, is physically handicapped as a result of a diving accident. In order to live independently, he modifies his personal residence at a cost of $20,000. The modifications included widening halls and doorways for a wheelchair, installing support bars in the bathroom and kitchen, installing a stairway lift, and rewiring so he could reach electrical outlets and appliances. Diego pays $200 for an appraisal that places the value of the residence at $124,000 before the improvements and $129,000 after. As a result of the operation of the stairway lift, Diego experienced an increase of $475 in his utility bills for the current year. Disregarding percentage limitations, how much of the above expenditures qualify as medical expense deductions?
A)$25,475.
B)$20,475.
C)$15,675.
D)$15,475.
E)None of the above.

Question

Quizplus · Accepted Answer

To calculate the amount of medical expense deduction, we need to follow the criteria laid out by the IRS. According to the IRS, "Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body."

The expenses incurred by Diego for modifying his personal residence to accommodate his disability are eligible for medical expense deductions. This includes the cost of widening halls and doorways for a wheelchair, installing support bars in the bathroom and kitchen, installing a stairway lift, and rewiring so he could reach electrical outlets and appliances. Therefore, the total amount of medical expense deduction would be as follows:

$20,000 (cost of modifications) + $200 (appraisal fee) + $475 (increase in utility bills) = $20,675

Since Diego's residence increased in value because of the modifications, we need to subtract the increase in value from the total amount of expenses incurred. Therefore,

$20,675 - ($129,000 - $124,000) = $20,475

So the correct answer is B, $20,475.

Diego, Who Is Single and Lives Alone, Is Physically Handicapped