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 2018 was $75,000. How much of these expenditures can Phillip deduct as a medical expense in 2018?
A) $14,000
B) $15,000
C) $23,375
D) $29,000
E) None of the above

Question

Quizplus · Accepted Answer

To calculate the deductible amount, we need to follow these steps:

Step 1: Determine the Medical Expense Threshold
For 2018, the medical expense threshold is 7.5% of AGI. 
7.5% of $75,000 = $5,625

Step 2: Calculate the Total Medical Expenses
The total medical expenses are the sum of the costs of the room addition, entrance ramp, and hallway widening: 
$32,000 + $5,500 + $8,500 = $46,000

Step 3: Calculate the Deductible Amount
The deductible amount is the amount by which the total medical expenses exceed the medical expense threshold. 
$46,000 - $5,625 = $40,375

However, there is a further limitation. The increase in the value of the residence due to the room addition ($17,000) must be subtracted from the deductible amount. 
$40,375 - $17,000 = $23,375

Therefore, Phillip can deduct $23,375 as a medical expense in 2018 (Choice C).

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