Mold Remediation & Medical Expenses Deduction

[vegas]

I bought an older home in Feb 23. The home inspection did not reveal any issues with the mold, due to having false walls installed. The inspector could not take the walls out to reveal what was underneath. While upgrading for a new heat pump and other repairs, I removed the false walls revealing massive mold problems. My wife and I are very allergic to mold (documented over many years by doctors). To remediate the mold required repairing the walls, removing the mold, encapsulating the walls, installing a perimeter drain to remove moisture, and installing a dehumidifier. The total cost to remediate the mold was $52,000.00. The value of the home did not increase due to the repairs. I have before and after pictures for documentation. 

Can I claim these costs under the Medical Expenses Deduction?  What is the likelihood of being audited?

[Vanessa A]

Possibly, if you have been told by a doctor that you are severely allergic to black mold, then the cost to remove the mold itself could be deductible as a medical expense. But this would have to be documented that you have a medical issue due to the mold.  If this mold was an incidental finding and you were not having documented issues due to the mold, then this would not likely pass the standard to be claimed as a medical expense, especially if it was not in an area where you are likely going to be exposed to it. So it would almost come down to, when you moved into the house, did you or your wife start having a lot more issues and a test revealed black mold illness?  If not, then you may not want to claim it as most people do have some type of allergy to black mold.  

If you do have documentation that the mold in your walls were directly causing a flare up of the problems then the cost of removing the mold would be a deductible medical expense if you chose to itemize your return.  Itemized expenses include mortgage interest, state and local taxes up to $10,000, medical expenses in excess of 7.5% of your AGI and casualty and losses in excess of 10% of you AGI with the first $100 not counting towards the loss.  Your health insurance and all medical expenses are only deductible for the amount that is over 7.5% of your AGI.  This means if your AGI is $50,000, then the amount that is over $3,750 is deductible.  

The cost of the encapsulating your walls and adding in new drainage would be considered home improvements so they would not be medical expenses, they would be added to the cost basis of your home.  

If you tried to claim the entire $52,000 for mold remediation, I would say the risk of audit would be there and the risk of losing on the audit would be more likely than not. 

Be aware, this is definitely one of those issues that you may find different opinions. But, if you want to be on the conservative side and not risk losing an audit, it is the safer way to go.