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previous page Previous Page: Publication 502 - Medical and Dental Expenses - How Do You Figure and Report the Deduction on Your Tax Return?
next page Next Page: Publication 502 - Medical and Dental Expenses - Damages for Personal Injuries
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication
taxmap/pubs/p502-008.htm#en_us_publink100014954

Sale of Medical Equipment or Property(p21)


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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#en_us_publink1000107836
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Worksheet D. Adjusted 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 expenses2.            
3. Divide line 1 by line 23.            
4. Enter 7.5% of your AGI for the year the cost was included in your medical expenses4.            
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 16.            
7. Enter your total allowable itemized deductions for the year the cost was included in your medical expenses7.            
8. Divide line 6 by line 78.            
9. Enter your AGI for the year the cost was included in your medical expenses9.            
10. Subtract line 9 from line 710.            
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
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Worksheet E. Gain 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 for1.            
2.Enter your selling expenses2.            
3.Subtract line 2 from line 13.            
4.Enter the adjusted basis of the equipment or property from line 5 or Worksheet D, line 124.            
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#en_us_publink100014955

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 equipment3,000
Medical services10,750
Total medical expenses13,750
7.5% of AGI (.075 × $15,000)−1,125
Allowable medical expense deduction12,625
Other itemized deductions6,400
Allowable itemized deductions19,025
  
You figure your adjusted basis as shown on the filled-in Worksheet D.
taxmap/pubs/p502-008.htm#en_us_publink100014956

(p22)


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taxmap/pubs/p502-008.htm#w15002q09
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Worksheet D. Adjusted Basis of Medical Equipment or Property Sold—Illustrated

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.1.3,000  
2. Enter your total includible medical expenses for the year you included the cost in your medical expenses2.13,750  
3. Divide line 1 by line 23..218  
4. Enter 7.5% of your AGI for the year the cost was included in your medical expenses4.1,125  
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 5.245  
6. Subtract line 5 from line 16.2,755  
7. Enter your total allowable itemized deductions for the year the cost was included in your medical expenses7.19,025  
8. Divide line 6 by line 78..145  
9. Enter your AGI for the year the cost was included in your medical expenses9.15,000  
10. Subtract line 9 from line 710.4,025  
11. Multiply line 8 by line 10.11.584  
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. 12.829  
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
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Worksheet E. Gain 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 for1.2,025  
2.Enter your selling expenses2.25  
3.Subtract line 2 from line 13.2,000  
4.Enter the adjusted basis of the equipment or property from line 5 or Worksheet D, line 124.829  
5.Subtract line 4 from line 3. This is the total gain or loss from the sale of the medical equipment or property.5.1,171  
taxmap/pubs/p502-008.htm#en_us_publink100014957

Determining gain.(p23)
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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 pagePrevious Page: Publication 502 - Medical and Dental Expenses - How Do You Figure and Report the Deduction on Your Tax Return?
next pageNext Page: Publication 502 - Medical and Dental Expenses - Damages for Personal Injuries
 Use previous pagenext page to find additional occurrences of topic items.Index for this Publication