Question

3) Mr. Mugabi must use a wheelchair. Upon advice from his physician, he installed an elevator and widened the front entrance of his house in 2017, incurring $15,000 and $4,000 in costs, respectively. Mr. Mugabi originally purchased his house for $202,000. An appraisal showed the fair market value of Mrs. Hampton' house immediately after these modifications at $212,000. Compute his currently deductible medical expense in regards to these improvements before AGI limitations. A) $19,000. B) $15,000. C) $9,000 D) $4,000.

Answer 1

Answer : C)$9,000

Explanation:

There is an exception to the cost of permanent improvement to the home, if their main purpose is medical care for you, your spouse, or your dependents.

But, such expenses are deductible only if you itemize your deductions and only to the extent they exceed 10% of your adjusted gross income for the year (7.5% if you're 65 or over). Moreover, the cost of the improvement must be reduced by the amount it increases the value of your property. If the value of your property is not increased by the improvement, the entire cost can be included as a medical expense.

Hence in the given case, as the value of the property is increased by the amount of $10,000 remaining part of expenses i.e $9,000($19,000-$10,000) is allowable as deduction as there is no information about GTI.