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taxmap/pubs/p502-008.htm#TXMP40ca73e1 Sale of Medical Equipment or Property(p21)

Sale of Medical Equipment or Property

If you deduct the cost of medical equipment or property in one year and sell it in a later year, you may have a taxable gain. The taxable gain is the amount of the selling price that is more than the adjusted basis of the equipment or property.

The adjusted basis is the portion of the cost of the equipment or property that you could not deduct because of the 7.5% limit used to compute the medical deduction. Use Worksheet D, later, to figure the adjusted basis of the equipment or property.

taxmap/pubs/p502-008.htm#w15002Q07

Worksheet D.mAdjusted Basis of Medical Equipment or Property Sold Instructions: Use this worksheet if you deducted the cost of medical equipment or property in one year and sold the equipment or property in a later year. This worksheet will give you the adjusted basis of the equipment or property you sold. 1.   Enter the cost of the equipment or property. 1.              2.   Enter your total includible medical expenses for the year you included the cost in your medical expenses 2.              3.   Divide line 1 by line 2 3.              4.   Enter 7.5% of your AGI for the year the cost was included in your medical expenses 4.              5.   Multiply line 3 by line 4. If your allowable itemized deductions for the year you purchased the equipment or property were not more than your AGI for that year, stop here. This is the adjusted basis of the equipment or property. If your allowable itemized deductions for the year you purchased the equipment or property were more than your AGI for that year, complete lines 6 through 11 5.              6.   Subtract line 5 from line 1 6.              7.   Enter your total allowable itemized deductions for the year the cost was included in your medical expenses 7.              8.   Divide line 6 by line 7 8.              9.   Enter your AGI for the year the cost was included in your medical expenses 9.              10.   Subtract line 9 from line 7 10.              11.   Multiply line 8 by line 10. 11.              12.   Add line 5 to line 11. If your allowable itemized deductions for the year you purchased the equipment or property were more than your AGI for that year, this is the adjusted basis of the equipment or property 12.

Next, use Worksheet E to figure the total gain or loss on the sale of the medical equipment or property. taxmap/pubs/p502-008.htm#w15002Q08

Worksheet E.mGain or Loss On the Sale of Medical Equipment or Property Instructions: Use the following worksheet to figure total gain or loss on the sale of medical equipment or property that you deducted in an earlier year. 1. Enter the amount that the medical equipment or property sold for 1.              2. Enter your selling expenses 2.              3. Subtract line 2 from line 1 3.              4. Enter the adjusted basis of the equipment or property from line 5 or Worksheet D, line 12 4.              5. Subtract line 4 from line 3. This is the total gain or loss from the sale of the medical equipment or property. 5.

If you have a loss, it is not deductible. If you have a gain, it is includible in your income. The part of the gain that is a recovery of an amount you previously deducted is taxable as ordinary income. Enter it on Form 1040, line 21. Any part of the gain that is more than the recovery of an amount you previously deducted is taxable as a capital gain. Enter it on Schedule D (Form 1040), Capital Gains and Losses.

For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Recoveries in Publication 525.

taxmap/pubs/p502-008.htm#TXMP5b89140a
Example.(p22)

You have a heart condition and difficulty breathing. Your doctor prescribed oxygen equipment to help you breathe. Last year, you bought the oxygen equipment for $3,000. You itemized deductions and included it in your medical expense deduction.

Last year you also paid $10,750 for deductible medical services and $6,400 for other itemized deductions. Your adjusted gross income (AGI) was $15,000.

Taking into account the 7.5% limit on medical expenses, your allowable itemized deductions totaled $19,025, figured as follows:

Oxygen equipment	3,000
Medical services	10,750
Total medical expenses	13,750
7.5% of AGI (.075 × $15,000)	−1,125
Allowable medical expense deduction	12,625
Other itemized deductions	6,400
Allowable itemized deductions	19,025

You figure your adjusted basis as shown on the filled-in Worksheet D.

taxmap/pubs/p502-008.htm#TXMP53cb5fe6 (p22)

This year you sold the oxygen equipment for $2,025 and you had selling expenses of $25. You must report on this year's tax return part of the $2,000 as ordinary income. To compute the part of the sales price that is taxable, you must determine the gain by subtracting the total adjusted basis from the selling price.

taxmap/pubs/p502-008.htm#w15002Q10

Worksheet E.mGain or Loss On the Sale of Medical Equipment or Property—Illustrated Instructions: Use the following worksheet to figure gain or loss on the sale of medical equipment or property that you deducted in an earlier year. 1. Enter the amount that the medical equipment or property sold for 1. 2,02500 2. Enter your selling expenses 2. 2500 3. Subtract line 2 from line 1 3. 2,00000 4. Enter the adjusted basis of the equipment or property from line 5 or Worksheet D, line 12 4. 82900 5. Subtract line 4 from line 3. This is the total gain or loss from the sale of the medical equipment or property. 5. 1,17100

taxmap/pubs/p502-008.htm#TXMP5c4200b5 Determining gain.(p23)

The taxable gain is the amount of the selling price that is more than the equipment's adjusted basis. You realized a gain of $1,171. In this case, the entire amount represents the recovery of an amount previously deducted for federal income tax purposes and is taxable as ordinary income.

Previous Page:  Publication 502 - Medical and Dental Expenses - How Do You Figure and Report the Deduction on Your Tax Return? Next Page:  Publication 502 - Medical and Dental Expenses - Damages for Personal Injuries Use   to find additional occurrences of topic items.