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Our home was damaged by water and resulting mold due to several

causes: a shingle blew...
Our home was damaged by water and resulting mold due to several causes: a shingle blew off the roof, the contractor omitted flashing at the base of a wall on a balcony, and a gutter was installed too close to the siding. Our doctor told us we are genetically susceptible to mold and must live in a mold-free home, so we chose to rebuild (to standards safe for us medically) instead of sell. Can we write off the cost of mold remediation? Are any of our losses considered medical? What about extra costs incurred in building over and above usual building costs (such as fiberglass wrapped drywall that won't ever mold)?
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Answered in 19 minutes by:
9/13/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,592
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C :

Thanks for your question, and thanks for using JustAnswer.com

Megan C :

If the primary purpose of your home restoration is medical, then you can write off the cost of the repairs as a schedule A deduction

Megan C :

The removal of the mold is tax deductible, but the repainting and other repairs are not

Megan C :

Also, if the repairs increased the fair market value of your home, you can only deduct the portion that did not increase the value of your home.

Megan C :

See publication 502 for more details. http://www.irs.gov/pub/irs-pdf/p502.pdf

Megan C :

There is a section in this about lead based paint, and although this is not the same as mold the same type of rules would apply

Megan C :

So, to recap, you can deduct as medical expenses the cost of mold removal. You can only deduct costs that do not add to your home's fair market value. Only the costs of removal are deductible, and only to the extent that they exceed 7.5% of your AGI. You can review publication 502 for lead based paint, which is similar to mold in how it is treated.

Megan C :

Do you have any further questions?

Megan C :

If not, please rate my response as "excellent" so that I may receive credit for assisting you today

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Customer reply replied 4 years ago

Sorry, never used this thing before and I didn't realize we had a chat going on.


 


I am a little confused by your answer. In multiple places drywall, cabinets and floors were wet/damaged by mold and had to be removed and replaced. So the cost of replacing all these can be written off, but not the painting cost?

Thank you for your follow up. It's a confusing area of tax law. The cost of the removal of the mold is deductible, but not the replacement of the new fixtures. So, removing the moldy drywall, cabinets, and floors is deductible, but not the replacement.

Please let me know if you need anything additional, and I'm sorry if I wasn't as clear in my previous answer.

Thanks again for being a valued JustAnswer.com customer.
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Customer reply replied 4 years ago

But if I remove moldy kitchen cabinets, I can't write off the cost of replacing them, at least of the quality that was removed? Doesn't that constitute repairing the mold? Otherwise I'm left with an empty shell of a house.

I realize that it doesn't make sense, but the cost of the mold removal is deductible as a medical expense, but then the repair (repainting, new cabinets, new drywall) is not. Instead, it's added to the cost basis of your house. Then, when you sell the house later on you will recover that cost. For instance, if it cost you $5,000 to remove mold and $10,000 to refinish/repaint, you could write off the $5,000 but not the other $10,000. If you purchased your home for $100,000 you would add that $10,000 to that figure to come up with a basis in your home of $110,000. This will reduce any potential capital gain later on.

Also, if in removing the mold from your house you increase the value of your house, you cannot write off the portion of the mold removal that increases your home's value. Chances are, though, removing the mold will not increase your home's value - it will preserve it.

If you look at the bottom of page 10 of the publication I linked to you, you will see the IRS stance on lead based paint removal. The removal itself is deductible, but the repainting etc is not. Mold is treated similarly.

I know this is confusing and may seem counterintuitive, but you have to remember that the IRS is the one who came up with the rules. That is probably why it doesn't make much sense.

If you have any other questions, please feel free to let me know. Thanks again for being a valued JustAnswer.com customer.
Megan C
Megan C, Certified Public Accountant (CPA)
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Megan C
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