Home improvements medically necessary

[Strongsilence-CPA]

Taxpayer spent 150K on medically necessary home improvements in 2023. He did not get an appraisal before, and he did not get an appraisal after.  He knows that there will be no increase in the assessed value by the county tax assessor (through a friend who works for the county.)  Is this sufficient corroborating evidence to show no increase in value for the medical deduction?

[BobKamman · Accepted solution]

Of course not.  It has nothing to do with property tax assessments, especially when you have a friend at the county.  A real estate agent might be a good source.  Two or three of them, even better.  

[IRonMaN]

Does the friend at the county know a good barber that your client can get some advice from?  Out of an abundance of curiosity, what did the client spend $150K on that won't have any effect on the value of the home?

[BobKamman]

I had a client who installed a system that would use a lift to carry a patient from bedroom to bathroom.  Another client installed an elevator from the basement, where an elderly parent had separate living quarters, to the ground floor.  In the first case, the improvements were removed before the house was sold, because they actually decreased the value of the home.  

[IRonMaN]

I said I was curious, I didn't say it was impossible. 😁

[BobKamman]

I know you are curious.  I wasn't trying to imply that you are snide.  

[Terry53029]

Bob, Ironman said "have an effect" which I would wonder how one could spend $150000 without having an effect (good or bad) I do know if you install a pool in some parts of the country it will increase value, and in other parts it will decrease value, but it will have an effect.

[Strongsilence-CPA]

We are going with the RE agent report - before and after.  Will be some 100s of bucks, but it is worth it.

Lift, ramp, handles were the biggest improvements.

The medical improvements make it less attractive for the general population of homebuyer such as families.

A RE tax assessment generally correlates, or tracks, the fair value sale price and could be viewed as a proxy for an actual agent report. I don't think that argument would win but lacking any other evidence, it could.

Thanks to you and everyone else who replied.

[abctax55]

@Strongsilence-CPA 

" ...A RE tax assessment generally correlates, or tracks, the fair value sale price" 

That may apply in your state and probably many more, but it most definitely doesn't apply in California (due to Prop 13).  My house is 'valued' on our property tax statement at $ 140,000.   We could sell it for a bit more than that 😉

[IRonMaN]

Based on prior posts, I think CA is home for both of you.

[abctax55]

Jeff.... I believe you are correct.

I 'suppose' one could just do the math on the increase.   I'm not sure I'd trust it tho; and for such large amount I'd likely go with an appraisal.

[Strongsilence-CPA]

CA is my state and I forgot about Prop 13 and you are right. 

[sjrcpa]

If they can afford $150K for improvements, they can afford the $750 - $1,000 for an appraisal.

[abctax55]

@Strongsilence-CPA 

I sent 'ya a private message.

At least twice a year (when paying property taxes...) I say thanks to Prop 13.  Altho I think it's a marginal plan on how to run a 'business'.  

[Strongsilence-CPA]

UPDATE:

The appraisal report arrived, and it showed an increase in FMV of $75,000.  This resulted in a medical deduction of $144K.  For a tax savings of $15,000.

(Sadly, the improvements were made for his son, who passed away a few weeks after the improvements were finished.)