Question

Jim, who is single and lives alone, is physically handicapped as a result of a diving accident. To live independently, he modifies his personal residence at a cost of $30,000. The modifications include widening halls and doorways for a wheelchair, installing support bars in the bathroom and kitchen, installing a stairway lift, and rewiring so he could reach electrical outlets and appliances. Jim pays $200 for an appraisal that places the value of the residence at $129,000 before the improvements and $140,000 after. As a result of the operation of the stairway lift, Jim experienced an increase of $680 in his utility bills for the current year. Disregarding the AGI floor for medical expenses, how much of these expenditures qualify as medical expenses deductions?

a. $30,880
b. $11,680
c. $34,880
d. $30,680

Answer 1

Jim can deduct the total cost of home modifications reduced by the amount the home's value increased, plus the appraisal fee and the additional utility costs, totaling $19,880. None of the option provided is correct.

Step-by-step explanation:

The question asks how much of Jim's expenditures qualify as medical expenses deductions. To answer this question, one must differentiate between medical expenses that are deductible and those that are not. In this case, since the home improvements were made for medical reasons, they can be considered as deductible medical expenses. However, any increase in the home's value due to the improvements needs to be subtracted from the total cost.

Jim spent $30,000 on home modifications and $200 for an appraisal. The value of the house increased by $11,000 after the improvements (from $129,000 to $140,000), hence, this amount needs to be subtracted from the total expenditures on modifications.

Therefore, Jim can deduct the costs of his home improvements ($30,000 - $11,000) plus the appraisal fee ($200) and the additional utility bills ($680) related to the operation of the stairway lift.

So, his deductible medical expenses are:

• Home modifications: $30,000
• Value increase subtraction: -$11,000
• Appraisal fee: $200
• Additional utility bills: $680

Total Deductible Medical Expenses: $30,000 - $11,000 + $200 + $680 = $19,880

Answer: The expenditures that qualify as medical expense deductions for Jim total $19,880. This means the correct answer is not listed in the options provided.