Frequently Asked Tax Questions --February, 1997

This column, in slightly different format, originally appeared in The San Francisco Examiner Newspaper, February 9, 1997


Medical deductions for equipment and home improvements; non resident children as dependents


Note: This exercise is for educational purposes only and is not intended to be legal or tax advice. Your particular facts and circumstances must be considered when applying the U.S. tax law. You should always consult with a competent tax professional with respect to your particular situation.

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Medical deductions for equipment and home improvements; non resident children as dependents


  1. Question: I am disabled and must buy a computer with software which enables me to communicate by speaking to the computer. Is this tax deductible?


  2. Question: I have severe allergies and my doctor recommended a forced-air air conditioning unit. Does this qualify as a medical deduction?


  3. Question: I live and work in the US, but I support my children and wife who reside in the Philippines. May I deduct them as dependents?


  1. Answer to Question #1:

    Generally, the full cost of special equipment related to medical needs is a deductible medical expense. For instance, the cost of buying, training and maintaining a seeing-eye dog is a deductible medical expense. So is the cost of necessary aids, such as tape recorders, special typewriters, projections lamps and special lenses.

    When a widely available item, such as a book, magazine or television set, is modified for medical purposes, only that cost which exceeds the regular price is deductible. However, if you needed a custom computer, not one that can be modified, then the entire cost would be deductible. For instance, the IRS ruled that a computerized communication system for a deaf person constituted a medical expense.

    In your situation, if you modify a standard computer, only the amount which exceeds the cost of the computer would be deductible.


  2. Answer to Question #2:

    This is a capital expenditure related to the permanent improvement of real estate. It may be a medical expense if the cost exceeds the increase in value to your property. For instance, if the cost of the air conditioner is $5,000 and it increases the value of your home by $1,500, then $3,500 would be deductible as a medical expense. The remaining $1,500 would increase your adjusted basis in your home. Your adjusted basis is generally the cost of your home, plus improvements.

    The Tax Court ruled that the cost of a home elevator for a person with heart disease was a deductible medical expense, to the extent that the cost exceeded the increase, if any, in his home's value. If not, then the entire expense is deductible. In contrast, if the elevator merely made life more convenient for the patient, but was not a medical necessity, then its cost would not be deductible.

    A swimming pool is deductible if it directly relates to medical care, but not for the patient's general health. Any portion of the outlay attributable to architectural or aesthetic compatibility is not deductible. The deduction is limited to the expense of the pool, less the increase in property value. For example, if it costs $40,000 to install a pool, including $5,000 for aesthetics, and your home's value increases $10,000, then you would have a $25,000 deduction.

    Medical expenses are subject to an overall limitation: Only that portion of your medical expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible as an itemized deduction on Schedule A, Form 1040. On a joint return, the percentage limitation is based on the total AGI for husband and wife. The deduction is available for your dependents and spouse.

    A medical expense deduction is allowed for premiums paid for medical care insurance (including contact lens insurance). Basic Medicare insurance is generally not deductible, but extra care is deductible.

    Note: Starting in 1997, withdrawals from an IRA for medical expenses are not subject to the 10% penalty for early withdrawal, if the withdrawals pay medical expenses that exceed the 7.5% of the AGI limitation.


  3. Answer to Question #3:

    If your children are under age 18 (age 24 if they are full-time students) you may claim them as your dependents if they are considered U.S. residents, even though they are not living with you. Or, you may still treat him as a dependent if he earned less than $2,550 and you provided more than 50% of his support.

    You need to file a joint return with your wife and claim her and your children as dependents, and must report her worldwide income. You must also agree to supply all books and records necessary to substantiate your joint income tax liability.

    Unless your spouse and children have social security numbers, you must obtain taxpayer identification numbers by filing Form W-7 with the IRS to claim them as dependents.



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    **NOTE: The information contained at this site is for educational purposes only and is not intended for any particular person or circumstance. A competent tax professional should always be consulted before utilizing any of the information contained at this site.**