The IRS may actually be your friend when it comes to some of the costs of providing elder care at home. Most people know about deducting direct medical expenses not covered by insurance. Many don't know that if you itemize, you may also be able to deduct quite a few home modifications and equipment purchases that on the surface might not immedidiately appear to be "medical."

Under "medical expenses" the IRS includes home improvements or things a homeowner purchased and installed in order to accommodate the home to the owner's, the owner's spouse, or a dependent's "disabled condition." The main purpose of these additions must be to enable "medical care," which is broadly defined.

As non-CPAs we interpret this as meaning these rules don't apply to your home if your elder is living with you but is not your dependent. It appears that they would apply if your "disabled" elder is still living in his or her own home and the improvements were made there.

If the accommodations or improvements did not increase the value of the home, then they would be completely deductible if you meet all the other criteria for taking these deductions (check with your CPA or tax professional). If they did increase the value (they use the example of an internal elevator as an improvement that would probably increase the home's value) then you can deduct the difference between the amount the value increased and the actual cost.

Potentially, not a bad deal for all those little things we do in the house to enhance safety or help with care that can add up to real dollars over the course of a year.

In Publication 502, Medical and Dental Expenses, the IRS provides some examples of items they judge do not usually increase the value of a home, but which do contribute to the ability to provide care to a "disabled" person:

• 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. (Installing a walk-in shower may or may not increase the value of the home. The IRS provides a worksheet to determine how much you might be able to deduct)

• Lowering or modifying kitchen cabinets and equipment.

• Moving or modifying electrical outlets and fixtures. Experts recommend raising floor outlets to 18 inches from the floor, for instance.

• 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, such as replacing simple audible smoke alarms with flashing alarms for the hearing impaired.

• Modifying stairways (by adding railings or widening treads, and installing anti-slip materials).

• Adding handrails or grab bars anywhere (whether or not in bathrooms). This might include hand rails in hallways, grab bars at entrances or anywhere where balance might be an issue, such as a step-down into a dropped living room or den).

• Modifying hardware on doors, such as replacing round door knobs with lever handles.

• Modifying areas in front of entrance and exit doorways.

• Grading the ground to provide access to the residence.

Before you run out and order new granite counters and a Sub Zero freezer to your new disability-friendly kitchen, be aware that the IRS says, "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 aestheric reasons, are not medical expenses."

So, look for all the receipts and cancelled checks for any modifications or improvements you made to accommodate someone with a disability over the past year for review when you prepare your income taxes. 

Also, to be perfectly clear, the information provided above is not intended to be tax or financial advice, but rather a recommendation that you investigate further whether any home modifications you might have made to your own or your elder's home could be deductible. Read IRS Publication 502 for the IRS definition of "disability," and talk to your tax professional before proceeding.