If I renovate my lower level for my mom with dementia to live, is that an allowable expense for Medicaid eligibility?

No, if you are using Moms money. Its considered an upgrade to your home and you benefit from it when u sell. You would need to go passed the Medicaid 5 year look back (or whatever ur State allows) for it not to count against her causing a penalty.

You can invest in a consult with an elder law/estate planning attorney for your state who has experience with Medicaid. There is a lot to know and my state (MN) has a 5-year "look back" period into finances, so you mom must be very careful with what she does with her money going forward. Do not co-mingle your funds with hers or do anything that can be interpreted as "gifting" of assets, property, etc. until you know facts for your state.

If your mom currently does not have a legally designated PoA, that meeting with an attorney would be the time for her to do that. Also very important she create a detailed Living Will, and make you her Medical Representative (different than a medical PoA). Good luck!