LLC property as residence and medical expenses

[Chirpee]

I have a multi-member LLC. The LLC has had "property held for investment" for more than five years. For almost three years, we have resided in the LLC's property. Due to my wife's poor health, we need to make capital improvements to the property. Can we fully deduct these as personal medical expenses? Thanks

[Mike9241]

are you and your wife the only members? if not this could present tax issues.

if you are, see PUB 502 capital expenditure section (page 6) for costs you can deduct. improvements that increase the value of the property are not deductible but add to the tax basis.

https://www.irs.gov/pub/irs-pdf/p502.pdf  

[Chirpee]

Thanks for your reply. No, my wife isn't a member. My BIL is. My wife is a very part-time employee of the LLC.

[Critter-3]

You have a potential mess on your hands ... you are living in an asset owned by the partnership probably rent free.  If so you cannot deduct the improvements as medical deductions  on a personal tax return  and  they would not be a deduction on the 1065 either.  Please seek local professional assistance to see if anything you are doing is legal at all.  

[Chirpee]

Other than my wife's very part-time work, there are no expenses related to the LLC's property held for investment. The LLC has no income, although this was not our original intent. For almost three years, we have been taking care of the property and all of its expenses personally. We hope to leave the property through our Wills.

[Chirpee]

May I ask, what would the tax difference be if my wife and I were the only members? Thanks

[Carl]

You 'NEED" to seek professional help on this. Especially if your state taxes personal income. Anything provided in this public user-to-user forum can not be relied upon because I'm sure there's significantly more to your situation than can be shared publicly.

May I ask, what would the tax difference be if my wife and I were the only members?

I myself can't provide what I would consider to be "useful" information to the question. But asking this "after the fact" is a moot point really. Regardless of the response, it doesn't change anything for you.

Overall as I see it (and I know I don't have all the facts) anything in the way of "improvements" you do to the house for any reason (including medical reasons for your wife) is a property improvement that adds to the cost basis of the house. Nothing concerning those property improvements is reported anywhere on your tax return until the tax year you sell the property.

At best, some improvements that qualify as "energy efficient" improvements will get you a credit, and I "think" the max credit you can get is $300. (Might be $500? Not sure). But those credits get subtracted from the cost basis in the tax year you sell the property.

Now the above information is "best as I can recall", as I've not taken the time to research and update my limited knowledge on this. But still, the above information does not help you "now", and it will not help you until the tax year you sell the property.

[Chirpee]

What I posted yesterday is a scenario; I'm sorry I didn't post as such.

My wife and I are the only members in the LLC. My wife is not an employee of the LLC. We have resided in the PHI for 2.75 years of the last 5.5 years. My wife does have serious and costly medical expenses, roughly 20K per year.

I now know, for some reason, it's best for her to remain a member in the LLC and not an employee. 

Thanks to all for any and all input.

[TomD8 · Accepted solution]

@Chirpee --

I think you will find this web reference very informative with regard to your original question:

https://www.nolo.com/legal-encyclopedia/deducting-medical-home-improvements.html

[Chirpee]

Thank you