Funding Home Modifications
Funding Home Modifications
The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program, which enables you to withdraw some of the equity in your home.
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage.
Unlike a Home Equity loan, a reverse mortgage pays you, there are no monthly principal and interest payments. With a reverse mortgage, you are required to pay real estate taxes, utilities, and hazard and flood insurance premiums.
Federal Income Tax Deductions
(From IRS 2017 Publication 502)
You can include the 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 to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. These improvements include, but are not limited to, the following items.
- Constructing entrance or exit ramps for your home.
- Widening doorways at entrances or exits to your home.
- Widening or otherwise modifying hallways and interior doorways.
- Installing railings, support bars, or other modifications to bathrooms.
- 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).
- 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 accommodate a home to a disabled condition are considered medical care. Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses.
State Income Taxes
Some states offer either income tax deductions or tax credits for medically required home modifications. To find out what is available in the state in which you live, visit the website for the Agency on Aging or Office of the Comptroller for your state.
There may be federal, state or local benefits you can use for home modification or other aging in place services to which you are entitled but are not taking advantage of. Over $1 billion in benefits go unused annually.
BenefitsCheckup.com is a website created by the National Council on Aging to help you find your benefits. Visit the site and enter your information and you will receive a list of benefits to explore.
Using Home Equity
In earlier generations, home equity was generally considered as something you passed on to your heirs. But changes in retirement funding options, the recession of a few years back and the societal increase in longevity are changing that viewpoint quickly. Very few people can now afford to pay all of their retirement expenses without exploring using home equity as an asset.
Home equity is generally made available to you via either a Reverse Mortgage or a Home Equity Line of Credit (HELOC). “This is going to become one of the key means of funding retirement in the future,” wrote Robert Merton, Nobel Prize winning Economist from M.I.T
Source: Home Advisor
Disability.gov lists a few resources and organizations that may be able to assist you with the decision on where to obtain funding for your home modifications.