Income Tax Medical Deductions for the Handicapped

JC Leahy, MA Accounting

TaxHelpWhenYouNeedIt.com

Twitter@TaxHelpWhenNeed. Tel. 301-537-5365

Starting in 2013, the federal income tax deduction for medical expenses has been reduced.    If you be of a cynical bent, you might maintain that “they” are trying to balance the federal budget on the backs of the sick and handicapped.  The actual fact is that in order to compute your deduction, you must take your total medical expenses and subtract 10 percent of your adjusted gross income.  Before 2013, the subtraction (or “threshold”) percentage was 7.5 percent of adjusted gross income. Thus, medical expense deductions have been reduced significantly.

Many expenses of handicapped individuals are deductible as medical expenses.  As medical expenses, expenses of the handicapped are deductible (1) only in the year they are paid, and (2) only if they are paid for the diagnosis, cure, mitigation, treatment, or prevention of disease or for treatments affecting any part or function of the body.  Furthermore, medical expenses are, generally, deductible only to the extent that they are paid BY the taxpayer FOR the taxpayer, or his spouse, or his dependent.  The last sentence can be both important and tricky.   For example if you have a wheelchair ramp put on your house and your cousin Charlie pays for it, you can’t deduct it because you didn’t pay for it.  You Cousin Charlie can’t deduct it because it’s not an expense for him, his spouse or his dependent.  In that case NO ONE can deduct the cost of the wheelchair ramp.  One caveat, however:  The definition of the word “dependent” is slightly different from its definition for dependency-exemption purposes.

So, what kind of handicapped expenses can be deducted as medical expenses?  Capital expenses deserve a special mention.  By definition, capital expenses are major outlays that last for years.  Examples are automobiles, houses, computers, furniture, and machines.  The general rule is that capital items cannot be expensed right away when they are acquired.  Instead, their expense must be spread over a specified number of years.  Major handicapped items such as wheelchair ramps or special home modifications are capital outlays but they may – must – be expensed in the year they are paid for.  This is generally a good thing, since you get the medical tax deduction right away.  The same goes for all handicapped capital outlays such as vehicle modification.

Some handicapped capital outlays may increase the value of your home or automobile.  In such an event, the increase in value would have to be subtracted from the medical deduction.  Thankfully, however, the IRS has a list of various capital outlays that are presumed to NOT increase home value.  These include many of the most common items such as wheelchair ramps, stairway modification, kitchen counter and cabinet modification, handrails, and landscape grading to improve access.

In the case of special handicapped automobiles, you may deduct the cost of modifications to your vehicle.  If the handicapped person requires a special design of vehicle, you may deduct the difference in cost between a regular car and the cost of a car designed to hold a wheelchair.

Other handicapped expenses may include home nursing services to care for the handicapped person’s condition, nursing home care if the primary reason for being there is to receive medical care, medical conferences if the conference deals with a chronic disease or condition, and special telephone or electronic equipment,

For more information, you may make an appointment to see JC Leahy (301-537-5365) or see the IRS Publication502 – Medical and DentalExpenses