Medical expenses often extend beyond doctor visits and prescriptions. For many individuals with disabilities or chronic illnesses, adapting a home to meet medical needs is a necessary and often expensive undertaking. Fortunately, the IRS allows certain home improvements to qualify as deductible medical expenses—provided they are made primarily for medical care. In this blog, we will explore which home modifications may be deductible, how to calculate the allowable deduction, and what records you need to support the claim on your 2025 tax return.
What Does the IRS Say About Medical Home Improvements?
According to IRS Publication 502, you may be able to include in your medical expense deduction the costs of installing special equipment or making home improvements if the primary purpose is medical care. This is especially relevant when changes are made to accommodate a disability or treat a chronic condition. However, there are strict guidelines and limitations on what qualifies and how much of the cost is deductible.
Basic Rules for Deducting Home Improvements
To be deductible as a medical expense:
- The home improvement must be directly related to medical care for you, your spouse, or a dependent.
- The primary purpose of the modification must be to alleviate or treat a diagnosed medical condition.
- If the improvement increases the value of your home, only the cost that exceeds the increase in value is deductible.
- If there is no increase in home value, then the full cost of the improvement is deductible.
For example, if you spend $10,000 to install a wheelchair ramp and the home value increases by $2,000, you can deduct $8,000 as a medical expense. If the improvement does not increase your home’s value, the entire $10,000 is deductible.
Examples of Qualifying Home Improvements
The IRS provides a list of modifications that are considered deductible when they are made for medical reasons. These include but are not limited to:
- Constructing wheelchair ramps
- Widening doorways or hallways for wheelchair access
- Installing handrails or grab bars in bathrooms
- Lowering cabinets or sinks for accessibility
- Modifying stairways with chair lifts or elevators
- Installing accessible showers or bathtubs
- Adding air purification systems for severe allergies or asthma
- Constructing separate living quarters for a nurse or caregiver (if medically necessary)
These modifications must be recommended by a licensed medical professional and directly tied to the diagnosed condition.
Non-Deductible Improvements
Not all improvements qualify. Home upgrades made primarily for convenience, aesthetics, or general aging-in-place concerns do not meet the IRS criteria. Non-deductible examples include:
- Remodeling a bathroom for cosmetic reasons
- Adding a pool or hot tub without a medical recommendation
- Installing security systems or intercoms not related to a medical condition
- General home repairs or maintenance (e.g., painting, roofing)
If the modification serves both medical and personal purposes, only the medical-use portion is potentially deductible. For instance, if a room is used partly as a therapy area and partly as a home office, only a portion of the expense may qualify.
Determining the Deductible Portion: Capital Expense Reduction
When a home improvement increases the fair market value (FMV) of your property, you must reduce the total cost by the amount of that increase to calculate the deductible amount. Here’s how to figure it out:
Step-by-Step Example:
- Cost of improvement: $15,000
- Increase in home value: $4,000
- Deductible amount: $15,000 – $4,000 = $11,000
To prove the increase in home value, you may need an appraisal or a letter from a qualified real estate professional. This ensures you’re deducting only the medically necessary portion of the expense.
Additional Operating and Maintenance Costs
In addition to the initial cost of the improvement, you can also deduct the operating and maintenance costs of medically necessary equipment. For example:
- Electricity costs to operate a medical-grade air purifier
- Repairs and upkeep for a wheelchair lift or stair glide
- Routine maintenance of accessible features like walk-in tubs
These ongoing costs are deductible in the year they are incurred, assuming they are not reimbursed by insurance or paid through a pre-tax health plan.
Documentation Requirements
To support your deduction, keep detailed records, including:
- Written recommendation or prescription from your physician
- Invoices and receipts for all expenses related to the improvement
- Proof of payment (bank statements, credit card receipts)
- Appraisal reports showing the property’s value before and after the improvement (if applicable)
It’s also a good idea to take before-and-after photos of the improvement, especially for substantial or structural changes.
Where to Report the Deduction
Medical home improvements are included in your total medical and dental expenses on Line 1 of Schedule A (Form 1040). You will calculate the total qualified medical expenses and subtract 7.5% of your AGI. Only the remaining amount is deductible. For example:
- AGI: $90,000
- Total medical expenses: $10,000
- 7.5% of AGI: $6,750
- Deductible amount: $10,000 – $6,750 = $3,250
If your total itemized deductions exceed the standard deduction for 2025 ($15,750 for single filers, $31,500 for married filing jointly), then itemizing may offer greater tax benefits.
Impact on Home Basis for Capital Gains
While deducting medical home improvements can reduce your current taxable income, it may also affect your home’s cost basis, which could impact future capital gains when you sell your home. The amount deducted for tax purposes generally cannot be added to your home’s basis. Consult a tax professional to weigh the short-term and long-term implications.
Conclusion
Yes, certain home improvements for medical reasons are deductible in 2025, provided they are primarily for medical care and not for general home enhancement. From wheelchair ramps to bathroom modifications and air filtration systems, these upgrades can offer both functional and financial relief. However, careful recordkeeping, clear medical justification, and an understanding of how improvements impact property value are crucial for ensuring a valid deduction.
If you’re considering major home modifications due to medical needs, consult IRS Publication 502 and speak with a tax advisor to maximize your deduction and stay compliant with current tax laws.
