To age in place is an increasing popular goal. Homeowners across the country are renovating their homes to enhance accessibility and lengthen their independent, productive lives. Of course, there’s a lot more to their goal-setting than preparing to install ramps and handles. Owners are putting sound financial planning into the mix.
In this article, we lay out some thoughts on promoting well-being and home accessibility. We’ll add tips on preserving value along the way.
Safeguarding Community Ties by Creating an Accessible Home
Growing older and staying at home can be hard to pull off, but success starts with a solid plan. That could involve downsizing into a place with nearby amenities for the older you. Homes in walkable areas become good picks when it’s more difficult to drive. Thus, moving downtown is one idea to consider. And it might be a little easier to move downtown affordably at this time, given the recent wave of city dwellers who have moved to the suburbs since mid-2020.
For those who value their long-time homes and communities too much to consider moving, there are other ways to prepare for the physical support that matters later in life. For example, you could create a plan to keep your home comfortable by modifying it — perhaps by creating a ground-floor living space.
Can you boost your home’s accessibility factor without putting a dent in your home value? There’s no negative impact on value from the addition of smart home features, better lighting, portable ramps or removable, slanted entranceway decks, or easy-to-use faucets, latches and locks. Installing new flooring, banisters or grip bars, or even lowering features of a home to improve reachability, usually won’t be a value issue.
Of course, there are buyer preferences to consider. Big modifications — lifts, stationary ramps, new plumbing fixtures or accessibility-focused bathrooms and kitchens — might have little appeal to future buyers. If they make some features of a home harder for some buyers to use, the home becomes harder to sell. Then again, a professionally modified home is likely to appeal to mature buyers in the years ahead.
☛ Today’s sellers need to know: Do the Generations Look for Different Features in the Homes They Buy?
For you, the enhanced ability to enjoy your home can be priceless. Staying put has immense value for homeowners with close family or friends nearby. Staying engaged with people and local activities might be the top factor in preserving independence late in life.
Tax Benefits of Enhancing Accessibility
Creating accessibility and preserving home value is a balancing act. Granted,
any decision to remodel comes with its mix of value enhancement and higher
property tax exposure.
For home modifications that do not raise a property’s value, costs may be deductible medical expenses, to some extent. As the Internal Revenue Service (IRS) states: “Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 7.5%” of your adjusted gross income.
The IRS further explains that the price of your alterations must be reduced by any property value boost when you deduct. The difference is deemed a medical expense. If the alteration doesn’t raise your property value at all, then the full cost is deemed a medical expense.
Certain modifications — such as a new, ground-floor bathroom or an elevator — can significantly boost a home’s worth. It’s best to consult with a tax specialist before embarking on the alterations, to plan and time the work to optimize tax savings. It’s also a good idea to have a home appraised before and after accessibility-focused alterations. This creates solid evidence to show changes to a home’s value.
Take before-and-after photos and save receipts. The IRS may request evidence and information on a taxpayer’s home alterations to verify their medical necessity. Owners should have medical proof of the need for the alteration. Note that medical expenses cannot be claimed if insurance or other parties paid for them.
Planning Major Upgrades? Call Your Local Building and Licensing Office
With a doctor’s letter, an owner might be able to deduct a deck, or even a spa or pool, and the costs of running and maintaining the new feature. But don’t forget permits and new assessments.
If you’re building a deck or spa, adding a bathroom, or grading a section of your yard for accessibility, you’ll need a permit. This means your tax assessment could go up. For example, installing a new pool adds value, ultimately raising the property tax bill. That can be partially offset by claiming a medical deduction. And if you’re itemizing on your returns, you’ll get a break through property tax deductions.
Professional contractors will handle the permit applications. Permits cannot be skipped. A seller whose alterations show up on a survey or title search, but are not matched by local permit records, can experience serious title issues. In contrast, permit and permit inspections done according to the rules should solidify the enhanced value of an upgrade.
☛ Readers planning substantial upgrades can check out Deeds.com’s guide to DIY Renovations: Everything You Wanted to Know (or Not) About Permits.
Passing Your Home On: Planning a Perfect Handoff
Finally, there’s the question of passing on a home you’re keeping for life. Is your home jointly owned? Will it automatically pass to a co-owner? If not, discuss the next step with your lawyer or financial adviser — as well as your beneficiaries. If someone gets your home by surprise, they might not have time to plan for things like maintenance, or a possible state estate tax (which can be triggered for a lower estate value than the federal estate tax is).
Popular ways to pass a home along include:
- The Home as a Bequest. This is a very popular way, because it gives the beneficiary a stepped-up cost basis, saving the taxes on the appreciation of a home. Will beneficiaries may even be able to take over the mortgage.
- The Home as a Gift. Some owners give their homes away when they are living, possibly through a quitclaim deed. If you pass your home to someone while you’re living there are gift tax responsibilities. The beneficiary will not get the stepped-up tax basis to offset the appreciation built up in the home since you first acquired it.
- The Home in a Revocable Living Trust. Homeowners may live in their homes yet pass them on after death through a trust, averting probate. This is especially appealing for owners of homes in different places — to avoid multiple probate situations. If you expect to depend on Medicaid benefits, avoiding probate may be important to shield your assets from recovery by conveying the title into a trust, or by using a transfer on death deed where allowed.
There are many title issues elder homeowners should know. We recommend taking some time to explore them before they become urgent matters. Take time to speak about your plans with anyone who will be following you in your home’s chain of title.
☛ How many ways exist to pass a home along to beneficiaries? For more options, see Deeds.com’s Homeowner Estate Planning Tips here.
Advance Planning is Key
To optimize tax benefits and to title assets correctly, consult with your tax professional and an estate planning attorney. Mindful of the issues we’ve presented here, we hope you can get started laying out your plans and listing your questions for these experts.
There’s no time like today to plan for preserving your independence. For many homeowners, planning to age in place is essential — both for self-care, and financial preparedness.
Supporting References
Internal Revenue Service: Publication 502, Medical and Dental Expenses (2020); and Frequently Asked Questions on Gift Taxes.
Isaac Christiansen, RISMedia.com: Modifying Your House for Disabled Accessibility Without Compromising Home Value (Jul. 2017).
Photo credits: BBH Singapore, via Unsplash.