Moving for medical reasons is not an allowable medical expense deduction.
You report the sale of the home in the normal way and pay capital gains tax if your gain is more than the $500,000 exclusion. The only way that moving for medical reasons helps on your taxes is the following: if you lived in your former home less than 2 years and moved due to unexpected medical needs, you can qualify for a partial capital gains exclusion even though you don't meet the 2 year rule for the normal exclusion.
If you make improvements to your new home for medical reasons, you can deduct the cost of those improvements as medical expenses only if they don't raise the value of your home. (For example, hand rails and accessibility devices installed in bathrooms are generally not viewed as raising the value of the home, so the cost can be deducted as a medical expense.)
