Need to Modify Your Home for Medical Reasons? 2012 is the Year to Do It

With tax deduction limits coming for 2013, medically related home upgrades are a smart project this year.


What a difference year makes.
For the 2012 tax year, you can take a tax deduction on medically necessary home improvements — like installing a wheelchair ramp and other projects that make life easier for an ill or injured family member — if you:

• Itemize deductions

• Spend more than 7.5% of your adjusted gross income on the upgrades (10% of AGI if you’re subject to alternative minimum tax).

Starting in 2013, if you’re under age 65, you can’t take the tax deduction on medical expenses until you spend 10% of your AGI. But if you’re 65 or older in 2013, you can stick with the 7.5% AGI tax deduction threshold through the end of 2016.
The rules for tax deductions on medical home improvements are tricky:
1. Start with what it costs to modify your home.
2. Subtract the value the upgrades add to your home.
3. What’s leftover is your tax deduction — if you meet your AGI threshold.
How it works
Say you’re 45 years old and spend $20,000 to put a bathroom on the first floor of your home because your husband can’t climb stairs anymore. Your AGI is $100,000. A REALTOR® says the bathroom adds $10,000 to the value of your house.
1. Start with the cost of the improvements: $20,000
2. Subtract your added home value: $10,000
3. Of that $10,000 difference, you can only take a deduction for expenses that exceed 7.5% of your AGI or $7,500.
So if you itemize, you can take a $2,500 deduction for the 2012 tax year. Wait until 2013 and you get no deduction because your threshold rises to 10%. If you’re over age 65, though, you can claim a $2,500 deduction.
Tip: Doing all your improvements in a single year will help you meet the AGI threshold.
Some of the improvements that you can claim a tax deduction for, according to IRS Publication 502, “Medical and Dental Expenses”:

• Entrance ramps for your home

• Grading the yard before building a ramp, or to make it easier to get in your home

• Widening exterior or interior doorways

• Widening or removing hallways

• Installing railings, support bars, or other bathroom improvements

• Lowering or modifying kitchen cabinets and equipment

• Moving or modifying electrical outlets and fixtures

• Installing porch lifts and other forms of lifts (but elevators generally add value to the house)

• Modifying fire alarms, smoke detectors, and other warning systems

• Modifying stairways

• Adding handrails or grab bars anywhere (whether or not in bathrooms)

• Changing door knobs

• Upkeep of medically necessary upgrades, like elevators, and operating costs

• Lead-based paint removal if your child has lead poisoning

• Renovating an existing bathroom to make it handicap accessible or adding a new accessible bath

Will the tax change encourage you to make necessary changes this year?


Read more: http://www.houselogic.com/blog/tax-deductions/medical-tax-deduction-changes-2013/#ixzz23dg4PbL4

Tax Deductions for Barrier-Free/Universal Design Home Modifications

Tax deductions for home –modifications, capital expenses incurred if home improvements are necessary for medical reasons. The following comes from I.R.S, Pub. 502, medical and dental expenses.

"You can include in medical expenses amounts you pay for special equipment. Installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. The cost of the improvement is reduced by the increase in the value of your property. The difference is a medical expense. If the value of your property is not increased by the improvement, the entire cost is included as a medical expense."

Certain improvements made to accommodate a home for a disability condition, do not usually increase the value of the home and the cost can be included in full as a medical expense. As the baby boomers age these improvements will definitely improve the resale value of your house. That being said, perhaps the time to make these improvements is sooner than later. These improvements include, but are not limited to the following items.

Adding an elevator or stair lift system. Elevators generally add value to the
house. Other improvements include:

• Constructing entrance or exit ramps for your home

• Widening doorways at entrances or exits to your home is a deductible expense. Widening or otherwise modifying hallways and interior doorways is deductible. Installing railings, support bars, or other modifications to bathrooms.

• Lowering or modifying kitchen cabinets and equipment is deductible.

• Moving or modifying electrical outlets and fixtures is deductible.

• Modifying fire alarms, smoke detectors, and other warning systems.

• Modifying stairways.

• Adding handrails or grab bars anywhere (whether of not in bathrooms) Modifying hardware on doors.

• Modifying areas in front of entrance and exit doorways.

• Grading the ground to provide access to the residence.

Only reasonable costs to make a home-modification are considered medical care. Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses.

Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense.

Improvements to property rented by a person with a disability are also an eligible medical expense. IRS Publication 502 indicates that “amounts paid by a renter to buy and install special plumbing fixtures in a rented house for a person with a disability, mainly for medical reasons, are medical expenses.”

As a footnote remember it is always much less expensive to include accessible/ universal design features in the original design of the home. Our universal designed “smart” home plans incorporate all of the above and more in the initial design.

There are also business deductions for complying with the ADA, Section 44 of the IRS Code allows a tax credit for small businesses and Section 190 of the IRS Code allows a tax deduction for all businesses.

Source: http://handicaphomemods.blogspot.com/2012/03/tax-deductions-for-barrier.html

2 Tax Deductions You Won't Get Next Year

Tax benefits for home owners disappeared at the end of 2011 and no one knows whether Congress will bring them back. How annoying!

Congress was so busy bickering at the end of 2011 that it allowed two important tax breaks for home owners to expire. Beginning with the 2012 tax year:
1. You can no longer deduct the cost of private mortgage insurance premiums.
2. You aren’t getting a tax credit for some of your home energy improvements.
You can take advantage of these provisions when you file your 2011 tax return — but beyond that, who knows.
Now that Congress is back in session, it’s likely going to pick up where it left off — arguing about what programs to cut and what taxes to raise. The programs, deductions, and tax credits supporting home ownership belong at the top their to-do list.
Up until the end of last year, you could deduct your private mortgage insurance premium (PMI) when calculating your income taxes. It was a benefit targeted to lower- and middle-income home owners. Once you made $100,000 or more, it started disappearing and anyone who had more than $110,000 of adjusted gross income couldn’t use it.
The home owners who have to get mortgage insurance are buyers with less than a 20% down payment and refinancers with less than 20% equity. That’s more often first-time home buyers or younger home owners and less often move-up buyers who’ve built up equity in their homes. So in taking away the PMI deduction, Congress is raising taxes paid by first-time home buyers and younger home owners leaving them with less money to spend on housing. That’s especially wrong-headed when the housing market is struggling to recover.
The tax credit for energy efficiency upgrades wasn’t enormous — it was capped at $500 or 10% of the cost for some projects; less for others. But it was a nice incentive to add insulation, new windows, or to upgrade your HVAC system with a more efficient unit — exactly the kind of actions that help decrease our dependence on fossil fuels, leading to a cleaner environment and less outflow of U.S. income to foreign countries. Not to mention, hopefully, smaller utility bills.
In 2012, home ownership and energy independence advocates will fight to get those expired tax rules back on the books and to have them apply retroactively. It’s a familiar fight — they had to do the same thing at the end of 2010.
But this year, the battle is more complicated because there’s a presidential election, discord between the major parties, and a general lack of consensus on any issues.
We home owners certainly don’t all agree on who to vote for, but most of us consider the renewal of those policies is a no-brainer. And we really don’t appreciate it when Congress lets those rules expire at the end of one year and then leaves us to wonder the rest of the next year whether they’ll be renewed.

Read more: http://www.houselogic.com/blog/tax-deductions/home-tax-deductions-2012/?nicmp=hlemail&nichn=solo&niseg=taxdeductions_2012#ixzz1r12GdoqN

Seven Possible Tax Deductions For Rental Property Owners

Homeowners are familiar with the tax deductions that are available to them but there are also potential deductions available for those who own rental properties. Realtor® Joe Cline of Austin, Texas lists seven possible deductions that rental property owners will want to be aware of:

Do you own any property that you rent out as investment? If yes, did you know that you can take advantage of tax deductions provided for owners of rental properties? That is right; aside from the income you earn by renting out and the possible profits from appreciation of your capital, owing a property can also reduce your income tax. In fact, rental real estate offers the most tax benefits compared to almost any other investment out there. Here are some of the possible tax deductions property rental owners can enjoy:



1. Tax deduction from interest
Rental property owners can take advantage of interest as their biggest tax deductible expense. If you are paying interest payments on a loan you obtained to buy the property, or if you pay interest on credit cards for services and goods incurred due to rental, you can declare these for tax deduction purposes.



2. Tax deduction due to property depreciation
Rental property owners may also recover the cost of their property by considering depreciation. Depreciation takes into account the deterioration and the wear and tear caused onto the property over time.



3. Deduction from repairs
Taxation regulations also allow deductions brought about by repair and improvement-related expenses, as long as these repairs are necessary and reasonable. The costs of improvement are fully deductible in the same taxation year as they were incurred. Fixing gutters, repainting, fixing leaks and floors, and replacement of broken windows – these are some examples of tax deductible repairs.



4. Deduction from insurance
You can also reduce your income tax by deducting the premiums you pay for insurance related to your rental transactions. This includes landlord liability insurance, fire or theft insurance for your rental property. If you hired employees, you may also deduct the amount you pay for their health or compensation insurance.



5. Deduction from professional and legal services
You can deduct all fees you pay for accountants, lawyers, real estate advisers, property management services, and other professional services you hire for your rental activity. These are considered part of your operating expenses.



6. Tax deduction from hiring employees and/or independent contractors
If you hire the services of other employees to perform something related to the rental, you can also deduct the wages you pay them as part of your business expense.



7. Deduction from travel expenses
If you spend on travel expenses because of your rental business, such as when collecting rent or inspecting your rental property for maintenance, you can deduct your fuel expenses, meals and other related expenditures. Even overnight travel may be deductible, as long as there are proper records to back up the claim.



As a rental property owner, there are tax deductions you can take advantage of to lower your yearly taxes. The abundance of these deductible expenses makes rental real estate one of the most attractive investments there is. Know which types you qualify for, and see how much potential savings you have been missing out on.


Read more: Seven Possible Tax Deductions For Property Rental Owners | REALTOR.com® Blogs