Funding Sources: Home Modification

The federal and state governments offer funding for providing accessibility after a natural disaster or man-made catastrophic event such as Hurricane Katrina or 9/11. Details on designated disaster areas can be located at:
http://www.fema.gov/news/disasters.fema.

Many churches and religious organizations make funds available for catastrophic medical assistance.

Many cities and towns make grant funds available through the local department of community development.

Home adaptations and modifications of special needs may be coordinated through government programs or home modification service organizations such as Rebuilding Together (local chapters across the US).

Some private insurance will pay for durable medical equipment. Check your policy for coverage details.

Medicare does not pay for ramps. However, Medicare has paid for the shower and lift products in certain situations. To find out more information on whether Medicare will help to cover the expense of a home modification (except ramps) ordered by a physician, call 1-800-MEDICARE (1-800-633-4227) or visit their website at http://www.medicare.gov.

Medicaid waivers in some states, state child health insurance programs (CHIP), private health insurance, workers' compensation and long-term care insurance benefits may cover the ramps, showers and lifts. The social service department of your hospital may be able to direct you to the special discretionary funds through private charities or endowments in your area.

Suggestion: Ask your attending physician to provide a prescription or document of medical necessity for a ramp, shower or lift product and submit a copy with your insurance claim.

The Internal Revenue Service reports allowable medical deductions for amounts paid for special equipment installed in the home. Reasonable costs to accommodate a home to a disabled condition are considered medical care and are deductible on federal income tax returns. IRS Publication 502-Medical and Dental Expenses

A prescription or document of medical necessity from an attending physician would be prudent to keep in a personal file, in the event of a question or audit by the IRS.

Taxpayers needing to fund large and ongoing medical expenses will also be interested in exploring tax-advantaged ways to pay these expenses beyond deducting them under the 7.5% of adjusted-gross-income threshold.

Examples of potential alternatives include funding via Sec. 125 "cafeteria plans," health reimbursement arrangements (HRAs), IRA and/or Sec. 401(k) withdrawals and medical savings accounts (Archer MSAs).

Sec. 125 cafeteria plans are by far the most common tax-advantaged medical expense reimbursement arrangements (after actual medical insurance). Flexible spending accounts (FSAs) are funded by employee contributions on a pre-tax salary-reduction basis to provide coverage for specified expenses (e.g., qualified medical expenses or dependent care assistance costs) incurred during the coverage period.

Reimbursement is subject to reasonable conditions, including a maximum salary-reduction amount that may be set by the plan's terms. Participants must use the FSA amounts for the specified expenses or forfeit any amounts remaining as of the plan year-end; see, generally, Prop Regs. Sec. 1.125-1.

Actually obtaining reimbursement may be problematic; as a practical matter, participants regularly report problems in convincing plan administrators that expenses (such as special school tuition and fees) are legitimate medical expenses properly reimbursable by the plan. Also, reimbursements actually available are frequently less than the total actual medical expense, due to employee-mandated limits on FSA funding.

Another alternative may be an HRA, which is an employee benefit plan intended to reimburse employees for medical expenses not covered by other insurance. In general, HRAs are funded by the employer, without employee salary reductions, to reimburse an employee for substantiated medical care expenses incurred by the employee and his or her spouse and dependents. HRAs typically provide reimbursement up to a maximum dollar amount for a coverage period, and may provide for carry forward of any unused amount.

IRA and/or Sec. 401(k) withdrawals and medical savings accounts (Archer MSAs). Early IRA withdrawals are penalty-free for payment of excessive unreimbursed medical expenses.

Consult with a tax professional for further information.

Home modification and repair funds from Title III of the Older Americans Act are distributed by your local area agency on aging. Call the US Administration on Aging's Eldercare Locator (1-800-677-1116) or visit the Eldercare Locator website at http://www.eldercare.gov.

Home Repair Loan and Grant Program (Section 504). For very low-income families who own homes in need of repair, the Home Repair Loan and Grant Program offers loans and grants for renovation. The Home Repair Program also provides funds to make a home accessible to someone with disabilities.

Homeowners 62 years and older are eligible for home improvement grants. Other low income families and individuals receive loans at a 1% interest rate directly from HCFP.