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Posted by PaulTry on October 28, 2006, 6:40 pm
Please log in for more thread options L K Williams 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).
> The difference between an improvement (which you can add to
> your basis) and a repair (which you cannot deduct) is basic.
> An improvement adds to the value of the property or extends
> its useful life. A repair only restores value or useful
> life which has been impaired.
>
> That said, it isn't always easy to distinguish between
> adding value or restoring it. A new floor in the bathroom
> can be either, for example; replace a linoleum floor with
> new linoleum would be a restoration, a ceramic tile floor,
> on the other hand, would be an improvement. The one only
> restores the value and life lost by use over time; the
> latter not only restores that value but adds new value
> because the materials have been upgraded.
I've been looking for a place to insert this comment and
this seems as good as any:
If you are doing improvements yourself and are buying
materials at Lowe's, Home Depot, or similar building supply
stores, be sure to make photo copies of your store receipts
as soon as possible. The itemized cash register receipts
from many of these stores, printed on thermal paper (or some
similar process), have a tendency to rapidly fade to
illegibility. When you get around to computing your basis,
you likely won't be able to read the original receipts.
Learned this the hard way!
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