Just What The Doctor Ordered

You might be able to take tax deductions for home improvements if they’re medically necessary. That can include the cost of installing special equipment or facilities in your home. To qualify:

* Establish that an outlay is medically necessary. Get a doctor’s note explaining that you need an air cleaning system for someone with asthma, for example. Or that you need a powder room on the ground floor so someone with a heart condition won’t have to walk stairs.

* Establish your true cost. Say that the cost of a new powder room add up to $20,000, Before-and-after appraisals indicate the addition increased your home value by $8,000. Thus, your net cost is the difference: $12,000.

* Add that net cost to your medical outlays for the year. The total of your unreimbursed medical costs are deductible to the extent they exceed 7.5 percent of your adjusted gross income (AGI). If your AGI is $80,000, your threshold is 7.5 percent of $80,000: $6,000.

Say your total of unreimbursed medical costs this year is $5,000. You’d get no medical deduction. But if you have a $12,000 net cost from a qualified home improvement, your total would be $17,000, which is $11,000 over the $6,000 threshold. So you could take an $11,000 tax deduction.