Hi, I recently paid an independent contractor $4000 to totally remodel the bathroom
in my mother's house in Hawaii. She is getting elderly and I don't want her to fall in the
shower. It is now totally handicapped accessible.
The house is in my name, my sister's name, and my Mother's name.
I wrote the checks out to the person alone, not an incorporated company, so it might
be hard to prove that the $4000 was spent on the remodeling project.
Can I even deduct these expenses on my 2010 federal taxes?
Estate Planning Attorney
Unless you claim your mother as a dependent, the answer is probably no - you can't take an income tax deduction (see below for why). Indeed, if you pay for medical expenses for another, they might in fact constitute a gift, though the amount of the transfer here (under $13,000) would appear to qualify as coming within the scope of the so called annual gift exclusion (Section 2503). Moreover, since you are a part owner in this house, that ownership would also reduce any gift element.
Medical expenses are deductible if you itemize your deductions on Form 1040 (see Schedule A), rather than taking the standard deduction but only if paid with resepct to certain indivudals (see below). They are subject to a threshold (last time I looked it, only medical expenses in EXCESS of 7.5% of adjusted gross income are deductible), which makes them difficult to qualify for even if you have them.
our question as to whether the cost of remodeling a home can qualify as medical expenses is insightful into this area of the law.
The standard for a deductible medical expense is as follows (see Section 213 of the Internal Revenue Code):
"There shall be allowed as a deduction the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a DEPENDENT (emphasis added) * * *". The term “medical care” means (and here I am only providing part of the definition (see Section 213(d) of the Internal Revenue Code or IRS Publication 502 for a more detailed review) amounts paid— for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body”. For a cheat sheet of what this might include, see http://www.usu.edu/hr/files/uploads/213(d)eligiblemedicalexpenses.pdf.
Assuming, for example, you do claim your mother as a dependent, I think the answer to your question would still be - it depends on your mother’s current need level. Simply because the bath is now handicap accessible and that your mother is getting on in years, does not mean her medical care required the remodeling. It might make you feel better and might make things easier for her no doubt, but that does not mean it would qualify as “medical care” under the statute. However, that is not to say they would not qualify, I just don’t know all the facts and circumstances.
I hope this was generally informative but you should not rely on my general comments and I would advise you to speak with a local accountant or attorney.
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