Homeowners could spend retirement savings early — and income tax-free – to adapt their homes for longer living, under a bill in Congress.
A change in federal tax law would let homeowners younger than 59½ withdraw up to $30,000 from their IRAs and 401(k), 403(b) or 457 plans with no tax liability to pay for renovations that help them live safely in their own homes when they become older or disabled.
H.R. 7676, the Home Modification for Accessibility Act, would give homeowners older than 59½ above-the-line tax deductions for such modifications, because they already are eligible to tap those funds without penalty. The bill would amend Section 72(t) of the Internal Revenue Code.
What Work Would Qualify?
The coalition behind the legislation envisions eligible upgrades to be anything that makes life easier for a family member with reduced abilities, from USB outlets to structural redesigns.
“Most people start to do this on the way home from rehab: ‘Oh, how are we going to get you in the door? How are you going to get a bath? That’s really hard to do in a crisis,” says Louis Tenenbaum, CEO of the HomesRenewed Coalition. This alliance of businesses, consumers and nonprofits is driving policy and investment to increase the number of age-friendly homes.
Most older homes need wider doorways, no-step entrances and showers, bathroom grab bars, brighter overhead lights, especially above stairs, and more electrical outlets, for starters, Tenenbaum says.
H.R. 7676 is in the House Ways and Means Committee, which would refine details such as eligible work and contractor requirements. If both the House and Senate pass the bill for President Biden to sign into law, the IRS would further detail qualified work during its rule-making process.
Every Home Matters
The genesis of the bill was to move the home remodeling industry to do more to enable aging in place.
Tenenbaum, who started as a carpenter and home remodeler, would like to see efficient techniques to update homes become standard. To that end, he founded HomesRenewed Coalition LLC, which is supported by dues from the long-term healthcare and remodeling industries, disability and senior advocates, and similar interests.
HomesRenewed’s 501(c)3 nonprofit arm has built an online resource center to give contractors and others the why and the how-to. In its data-packed research paper, former Freddie Mac and Wells Fargo executive Jesse M. Abraham writes, “The existing … outdated housing stock becomes, literally, an accident waiting to happen when it comes to its contributions to falls for older citizens.”
“When I got in this business (contracting) in the early 1990s,” Tenenbaum says, “what I saw so clearly was people in Chevy Chase, Maryland, with beaucoup bucks who never saw the inside of their homes again after they had a stroke, and that’s what stirred me on this.
“They end up going to a nursing home or assisted living and end up never coming home again, even though they have a perfectly lovely home and considerable financial resources,” he said.
Biggest Bangs for 30,000 Bucks
AARP studied costs of home renovations to find average costs:
- Kitchen remodel: $30,000+.
- Bathroom remodel: $25,000+.
- Stair chairlift: $2,000 – $15,000.
- No-step entries: $900 – $3,000.
- 36-inch doorways, $225.
- Lowering electrical outlets: $50 per switch.
Kitchen renos for senior years or disabilities might include pop-up and roll-out shelves, Lazy Susan cabinets, refrigerators with bottom freezer drawers, and ranges with all controls in the front.
Bathroom upgrades often include grab bars in bathing and toilet areas, curbless walk-in showers with a bench, and floor-plan changes for wider paths for wheelchairs and caregiver help.
Small game-changers that Tenenbaum wants to see become commonplace include easier-opening door handles, shelves near doorways to put down packages, grips in hallways, bright solar nightlights over street numbers for first-responders to see, and brighter lights over dining tables, which folks also use to pay bills, work jigsaw puzzles and video-chat with grandkids.
‘Ramp’ By Another Name is Sweeter
HomesRenewed is writing a grant proposal to develop contractor guidelines to do installations well and efficiently, Tenenbaum says.
“This is where the industry needs to go. When I started building, there were no regulations on a window size or insulation,” he says as one example. “The industry adapted, even though it probably resisted.”
In standardizing sizes and energy ratings, window replacements became more efficient and affordable. Now, homeowners save money on gas and electric bills.
The image of some adaptive work cries for a new narrative, too, Tenenbaum says, including the words we use.
Case in point: “Ramp” conjures an ugly image of front steps that may as well flash in red neon lights, “Vulnerable person lives here.”
Crafty landscaping removes steps without a ramp. “I like to use the word ‘no-step entry’ instead of ‘ramp,’” Tenenbaum says.
“I once had a TV crew from HGTV team pull up to a house I was working on and say, ‘Hey, we thought we were coming out here to show a ramp,’” Tenenbaum recalls from about 25 years ago. “I said, “Do you see any steps in that landscape?’ They said, ‘No,’ and they get out of the car and do the filming.
“If we can get to a point that these are techniques all contractors are familiar with, it becomes a standard of practice,” he says.
Tax Policy As the Prod
H.R. 7676 wasn’t, itself, what HomesRenewed set out to achieve.
“This is all new to me,” Tenenbaum, the tradesman, says of politics. But “contractors are reluctant to take on new techniques.”
The MetLife Mature Market Institute published Tenenbaum’s paper, “Aging in Place 2.0: Rethinking Solutions to the Home Care Challenge,” in 2010.
Then one day in 2015, it dawned on him that lifesavers we now take for granted, like seat belts and lead-free paint, happened only “because we as a society said this is a priority,” he says.
“I started to think: How can we get policy on the issue of how to prepare people’s homes (for senior years), because that’s like Mom-and-apple-pie,” Tenenbaum says.
Adaptive remodeling helps everyone in the home, not just seniors and people with disabilities. It can save big money on an ER visit when a 17-year-old daughter otherwise might trip on a ledge getting out of the shower when her mind is preoccupied dressing for a date, Tenenbaum says.
“It’s the way airbags started as an option in Cadillacs, and back-up cameras started as an option in higher-end cars,” he says. Public policy compelled automakers to provide them affordably on all cars.
Long Row Still to Hoe
In May, HomesRenewed convinced U.S. Reps. Charlie Crist (D-Fla.) and Tom Suozzi (D-N.Y.), to introduce H.R. 7676, albeit late in this two-year session. It attracted bipartisan support when Rep. Daniel Meuser (R-Pa.) signed on as a co-sponsor.
“My hope was this would get tagged onto the reconciliation process (in the Senate, if the House could act quickly), but that hope is like spitting in the wind,” Tenenbaum says.
With Crist on the stump for Florida governor, Tenenbaum is looking for more legislative sponsors to re-introduce it in the next Congress in January, as well.
Crist’s legislative staff says ongoing testimony in the House Ways and Means Committee will expand understanding of the bill. They expect eligible remodeling work to be “fairly broad,” for example, enough to include full-home rewiring to support medical appliances. Countertops and tile, on the other hand, will likely be ineligible, unless there’s some demonstrable relevant purpose, like a no-slip feature.
“This (bill) will reduce injuries and subsequent medical costs associated with falls,” Crist said in a press release, “as well as drive development and investment in the market and create new job opportunities for skilled laborers and contractors.”
‘Investing in Themselves’
Tenenbaum says one approach could have been federal subsidies to help pay costs to adapt homes, but the coalition landed on tax policy as a prudent and sustainable way to achieve its goal.
The tax incentive “isn’t a giveaway. It’s not an entitlement,” he says.
“It’s about jobs. It’s about pulling yourself up by your bootstraps. And it’s about people investing their own money to help themselves,” Tenenbaum says. “Small business is a great form of social organization.”
Abraham, the doctoral economist, “found that H.R. 7676’s tax revenue loss is more than offset by Medicare claims reduction in administrative hours, alone, not even counting the vast savings in caregiver costs and subjective lifestyle benefits, Tenenbaum noted. Abraham authored the group’s paper “Making It Safe to Age in Place.”
If the tax policy causes the trades industry to adapt most of the existing home stock, and if the public makes aging in home a normal part of retirement planning, the need for tax incentives would die out, says Tenenbaum
“I hope financial advisors will start to help with this, because when they’re talking about helping people preserve their lifestyle and their assets, that’s what this bill is about,” he says.
“If they can nudge someone to prepare their home, it helps them preserve their money and stay in their homes longer, which is what most people really want.”
Linda Hildebrand is a longtime newspaper editor and consumer reporter.