Is Radon Mitigation Tax Deductible?

Homeowners installing a radon mitigation system often question whether the cost can be deducted on their federal income tax return. Radon is a naturally occurring radioactive gas that can enter homes from the ground and, with prolonged exposure, can lead to significant health risks. A mitigation system is installed to reduce the concentration of this gas to safe levels. Understanding the tax implications of this home improvement requires a specific look at how the Internal Revenue Service (IRS) classifies certain expenses, as the possibility of a deduction depends on a specific set of circumstances.

Qualifying Radon Mitigation as a Medical Expense

The entire basis for deducting the cost of a radon mitigation system hinges on its classification as a medical expense. The IRS defines medical expenses as costs paid for the diagnosis, cure, mitigation, treatment, or prevention of disease. A radon mitigation system directly serves this definition, as its purpose is to reduce the risk of developing lung cancer from indoor radon exposure, thereby preventing a specific disease. For the expense to qualify, its primary purpose must be medical care.

This distinction is important because general home improvements that are merely beneficial to overall health, like installing a home gym, are not deductible. A radon system, however, does not have a dual purpose of improving general wellness; its function is targeted specifically at preventing a serious illness. The expense is not for the home’s general upkeep or aesthetic improvement but is a direct preventative measure against a known carcinogen.

Calculating the Deductible Amount

Determining the deductible portion of a radon mitigation system involves a two-part calculation. First, the expense is treated as a capital improvement, meaning it is a permanent installation that could increase the value of your property. According to IRS rules, if a medical capital improvement increases your home’s value, you cannot include the amount of the increase in your medical expense calculation. The deductible amount is the cost of the system minus the increase in the home’s fair market value resulting from its installation.

For example, if a radon mitigation system costs $3,000 to install and an appraisal determines it increased the value of your home by $1,000, only $2,000 of the cost is considered a qualifying medical expense. If the system does not increase the property’s value at all, the entire $3,000 cost can be included. This step is necessary to isolate the portion of the expenditure that is purely for medical purposes from the portion that represents an investment in the property.

After establishing the eligible medical expense amount for the radon system, it must be combined with all other unreimbursed medical expenses for the year. The total is subject to the Adjusted Gross Income (AGI) threshold. Taxpayers can only deduct the portion of their total medical expenses that exceeds 7.5% of their AGI. For instance, if your AGI is $80,000, your threshold is $6,000. If your eligible radon expense was $2,000 and you had $5,000 in other medical bills, your total medical expense is $7,000, and the final deductible amount would be $1,000.

Required Documentation and Information

Proper record-keeping is fundamental when preparing to claim a deduction for radon mitigation costs. Before filing, you must gather all relevant documents to substantiate the expense and the calculation. To apply the deduction limits, you must know your AGI, which is found on your Form 1040.

You will need the following documentation organized and accessible:

• The detailed invoice or receipt from the contractor who installed the radon mitigation system, showing the total cost and date of service.
• A Letter of Medical Necessity from a physician, which may be needed to substantiate that the expense was for the prevention of a specific disease.
• A complete record of all other unreimbursed medical expenses paid during the tax year, including payments to doctors, dentists, and hospitals.
• Documentation supporting a change in your home’s value, such as a formal appraisal, if the mitigation system increased it.

How to Claim the Deduction on Your Tax Return

Once you have determined that the radon mitigation cost qualifies as a medical expense and have calculated the final deductible amount, the deduction is claimed on your tax return. This requires you to itemize deductions rather than taking the standard deduction. Itemized deductions are reported on Schedule A (Form 1040).

The final calculated amount is entered on the “Medical and Dental Expenses” line of Schedule A. This amount is then combined with your other itemized deductions, such as state and local taxes and mortgage interest, to determine your total itemized deductions. The total from Schedule A is then transferred to your main Form 1040, where it reduces your taxable income.

It is important to retain all supporting documents, including the installation invoice, proof of payment, and any home value assessments. While you do not submit these documents with your tax return, you must have them available to provide to the IRS if your return is selected for review.