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Tax question


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To my knowledge, primary residence repairs are NEVER deductible and improvement/replacements are only a tax savings at the point of sale. (I assume this is a primary residence and not a rental property). Therefore, this doesn't fall into sec 162, sec 167, or sec 212 for federal tax purposes since this isn't income producing property.

However, even though you do not get to deduct any such costs for income tax purposes, all is not lost. You get to add the cost of improvements to your home (items & work that increase the value of the home but NOT repairs) to the home's cost basis. Again, these are non-deductible and non-depreciable against income, but if/when you sell, you recover these costs tax free since your adjusted basis now includes the cost of improvements. It should be noted that if you are a single filer, the first 250k of gain is tax free anyway (500k for joint filers) so for many, the addition to the home's cost basis is of no added benefit.

The IRS website has plenty of great information about what is deducitble and what is not. Check out IRS Publication 523 regarding adjusting your home's basis.

"Recordkeeping. You should keep records to prove your home's adjusted basis. Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Keep records proving the basis of both homes as long as they are needed for tax purposes.

The records you should keep include:

Proof of the home's purchase price and purchase expenses,

Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis"

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Deducting cost of home or improvements. To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home.

The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits.

Substantial improvement. An improvement is substantial if it:

Adds to the value of your home,

Prolongs your home's useful life, or

Adapts your home to new uses.

Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements.

Taken from IRS.GOV.....


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Just to clarify, these are not deductions against income, but additions to your home's cost basis that are deducted from the sale price to determine your actual gain. The improvements you make to your home are capitalized.

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