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Subject Author Date
Home improvements to reduce profit from home sale? rick m 10-24-2006
Posted by rick m on October 24, 2006, 7:27 am
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 I've looked around and can't find an answer to this.

We've been in our home since 1992 and plan on selling in the
spring of 2007. Values here have appreciated quite a bit.
Anyway, we were keeping receipts for work done on the house.

The questions:
1) Can we use these receipts to reduce the profit on the
home sale?

2) What does or doesn't qualify for this? I thought that
improvements counted - like if we redid the kitchen and put
in upgraded cabinets it would count but stuff like paint and
light fixtures wouldn't since their purchase was part of a
home repair (you have to paint once in a while, and light
fixtures do go south).

Thanks,
Rick

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Posted by joetaxpayer on October 25, 2006, 6:45 pm
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 rick m wrote:

> I've looked around and can't find an answer to this.
>
> We've been in our home since 1992 and plan on selling in the
> spring of 2007. Values here have appreciated quite a bit.
> Anyway, we were keeping receipts for work done on the house.
>
> The questions:
> 1) Can we use these receipts to reduce the profit on the
> home sale?
>
> 2) What does or doesn't qualify for this? I thought that
> improvements counted - like if we redid the kitchen and put
> in upgraded cabinets it would count but stuff like paint and
> light fixtures wouldn't since their purchase was part of a
> home repair (you have to paint once in a while, and light
> fixtures do go south).

You are correct, paint doesn't count (toward home
improvement cost). I don't see why permanent light fixtures
would be excluded. If you upgraded from a 49 cent pull chain
to a $750 chandelier in a dining room, and that fixture is a
ceiling mount (i.e. permanent) that is an improvement.

JOE

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Mike Wellman on October 25, 2006, 6:45 pm
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rick m wrote:

> I've looked around and can't find an answer to this.
>
> We've been in our home since 1992 and plan on selling in the
> spring of 2007. Values here have appreciated quite a bit.
> Anyway, we were keeping receipts for work done on the house.
>
> The questions:
> 1) Can we use these receipts to reduce the profit on the
> home sale?
>
> 2) What does or doesn't qualify for this? I thought that
> improvements counted - like if we redid the kitchen and put
> in upgraded cabinets it would count but stuff like paint and
> light fixtures wouldn't since their purchase was part of a
> home repair (you have to paint once in a while, and light
> fixtures do go south).

Yes, improvements can reduce the profit. However, assuming
this is your primary residence, you can have a profit of up
to $500,000 (married couple) without incurring any tax
liability. There are things that can complicate this - like
having deducted home-office expenses or prior rental of it -
but generally none of the gain is taxable up to the $500,000
limit.

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Bill Brown on October 25, 2006, 6:45 pm
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rick m wrote:

> I've looked around and can't find an answer to this.
>
> We've been in our home since 1992 and plan on selling in the
> spring of 2007. Values here have appreciated quite a bit.
> Anyway, we were keeping receipts for work done on the house.
>
> The questions:
> 1) Can we use these receipts to reduce the profit on the
> home sale?

Yes, the cost of improvements increase your basis in the
home and reduce your realized gain.

> 2) What does or doesn't qualify for this? I thought that
> improvements counted - like if we redid the kitchen and put
> in upgraded cabinets it would count but stuff like paint and
> light fixtures wouldn't since their purchase was part of a
> home repair (you have to paint once in a while, and light
> fixtures do go south).

Right.

If the home has been your primary residence and you have
owned it for 2 of the 5 years ending on the closing date you
can exclude up to $250,000 of gain ($500,000 on a joint
return where the spouse meets the 2 of 5 primary residence
test).

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Bill on October 25, 2006, 6:46 pm
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castufari@gmail.com (rick=A0m) posted:

> I've looked around and can't find an answer to
> this.
> We've been in our home since 1992 and plan
> on selling in the spring of 2007. Values here
> have appreciated quite a bit. Anyway, we were
> keeping receipts for work done on the house.
> The questions:
> 1) Can we use these receipts to reduce the
> profit on the home sale?

Actually, you would use them to increase your _cost basis_
... which will also reduce your net profit on the
transaction.

> 2) What does or doesn't qualify for this? I
> thought that improvements counted - like if we
> redid the kitchen and put in upgraded cabinets
> it would count but stuff like paint and light
> fixtures wouldn't since their purchase was part
> of a home repair (you have to paint once in a
> while, and light fixtures do go south).

You've got the basics right: Maintenance expenses are not
to be included as "improvements" ... but additions or
upgrades are OK. See Pub 17, Chapter 15, "Selling Your
Home" or Pub 523.

Bill

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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