Selling a home and renting - capital gains taxes

Home being sold was bought more than 30 years ago and there is no mortgage.

There is an IRS booklet that deals with the items. The biggest thing is determining your cost basis which is the purchase price plus capital improvements made during the thirty years. Hope you kept good records.

There is the question, do you get to include the cost of a new kitchen? What about the last kitchen? What about cleaning the place to prepare for open houses? Painting? What if painting was done a year ago?
Will definitely look for the IRS pamphlet, thanks.

Painting and cleaning aren't capital improvements, they're repairs/maintenance undertaken in the normal course of owning a home. The new kitchen, however counts. Save your receipts.

ali r.
DG Neary Realty

so...if you have a client who spends 20K to refurb their place prior to selling...would you suggest that they add that amount to their basis price or consider it otherwise?

Painting has to be a capital improvement.
And cleaning, if you are power washing the outdoor siding? Hiring a housekeeper before showing?

fp is an idiot.

And of course here's columbiacounty adding to streeteasy.

hfscomm1

hfscounty1

hfscomm1

columbiacounty1

hfscomm1

What is going on here? Please stop

hfscomm1

yes you are

why

hfscomm1

Yes you are.

hfscomm1

so, fp, a new roof that isn't absolutely needed? i think you are not necessarily giving good advice. if i don't need to paint anything, but choose to do so to improve the quality of my home is that an improvement or a necessary repair? i'd have to look up the tax code, but this seems quite off to me.

I agree with front porch. Painting , power washing are not capital improvements. Everything is basically capital improvements or repairs upkeep. One adds to your cost basis the other doesn't. You probably need an accountant.

>I agree with front porch.

Uh oh, columbiacounty will now call you an idiot.

whats so complicated? married? you get 500k profit free and clear assuming you lived in it, then any real improvements can be added to your cost basis. Hey, dont be a greedy bastard. You cant count sweeping cleaning painting and stuff like that - no MAINTENANCE items.

"Another exception for repairs is if they are made in connection with the sale of your home. For example, if you painted your house, or cleared out brush in the back yard to improve the marketability of your home before the sale, you may subtract this from the selling price as a cost of sale. This doesn’t actually change your basis, but it does reduce your selling price."

I wonder what hour turns cc from helpful to unhelpful. Apparently before 8:30am he is helpful but at 8pm he is not.

One of the original questions was, 'what's a capital expenditure'? I stated pretty clearly that painting isn't. This doesn't have to do with how we as individuals might WANT the tax code to function, it has to do with how the tax code ACTUALLY functions. My experience with this isn't hypothetical; I've sold property in New York State and paid capital gains taxes on it.

That's my two cents. If you guys want to keep hip-shooting about how the tax code MIGHT work in a world where you get together and redesign it, feel free. But please leave the personal attacks out of it.

ali r.
DG Neary Realty

Mr. Sutton, thank you, obviously not paying attention to the $500K which is significant.

I'll leave columbiacounty and frontporch to debate, but check into it separately. Thank you

debate?

check the irs. its clear as a bell. money spent in conjunction with sprucing up a property for sale reduces the gain. just like paying a real estate agent does.

front porch is not correct.

What personal attack? I'm getting a house ready to sell, and I'd been given info that isn't consistent with what you were saying.

this is not an investment property columbiacounty!

nor is mine. "the sale of your home" MrSuttonPlace, not the sale of an investment property.

yep. that is why I agree with you that the costs associated with cosmetically preparing the home for sale are NOT applicable to cost basis.

well, we're clearly looking at the same info very differently. and possibly with some semantic games thrown in.

BTDT - and been audited by the IRS, and lived to tell the tale.

Painting in conjunction with getting a property ready for sale, whether it's investment or your own property, can be added to cost basis. Painting as a matter of maintenance is not. Where it gets contentious might be when the painting is done (say) a year before putting the property on the market. In my case, the sprucing up/staging was done at the same time as listing the property, and the IRS auditor didn't even blink an eye.

Amend my statement - added to selling expenses and NOT cost basis. It is a grey area.

same difference. reduction to sales price. reduction to cap gain.

but...

ms. front porch has never uttered the words....

hey, I was wrong.

columbia its this you being helpful or unhelpful?

hfscomm1

I am wary about weighing in when it is a little contentious here. I agree with 10023. I have sold several homes and was very careful to check with my accountant. Painting is not a capital improvement. However all costs associated with selling the property -- agent fee, professional services like staging, etc can be deducted but you cannot buy some throw pillows or any impermanent fixtures and deduct them. You cannot even deduct flowers like annuals for a garden -- only permanent shrubs, etc. You should also be very careful about timing. I think to avoid an audit, all selling expenses like painting, etc should be within one month of putting the property on the market.

And, the smart thing to do is check with your own accountant and not a blog.

Hey about ready. Happy to see you on the boards.

seems very straight forward.

did front porch give correct advice or not?

>aboutready - the IRS doesn't play "semantic games". Painting may be deducted from sale price, is definitely not a capital improvement. Just admit you can be, and are, wrong

bottom line is that it can be deducted. who cares about semantics?

And referring to a comment on another thread, Napoleon, the Dalai Lama, many Russian and Chinese dissidents, as well as several African dictators, would definitely NOT agree that "exile is just a state of mind"

Why don't you try it for a decade or so and then report back.

columbia, you need to make up your mind, do you want to be taken seriously our just play an angry disrupting buffoon?

Apt23, mine won't quite be within a month of listing because of delays, but I've had my broker out to discuss the details already, and it's a $70k+ "sprucing up" that we're talking about, which is quite a bit for where we're having work done. I've been told I can definitely count those costs against my sales price for tax purposes. Not having had this be a potential issue before, I did not know the particular reason or IRS language justifying my being able to do so, I just thought that it ran counter to the very broad assertion that those activities would not need to be accounted for after sale.

Hey ar, why don't you go back to your exile state of mind?
Was so pleasant here on SE without your snide, snotty , self aggrandizing posts .

Have you added any info to this thread that is in any way responsive to the OP? Blowhard.

You're missing a hyphen between self and aggrandizing. I don't really mind such errors, but I know how important superficial things are to you.

AR: I also think you should talk to your accountant about "trigger" points. I am sure there is some % of sales cost deductions over sales price that might draw the attention of the IRS. Even if you have everything carefully documented, why would you want to risk an audit. Especially if, say, a 60K spruce up would put you in the safety zone.

Oh, sorry, my sprucing up comment was misleading. I'm doing some other work (new master bath, for example, and believe me it was about time, it was fugly) as part of my preparations. I have a property that will likely do much better if little work is needed by the buyers, given the target purchasers. We shall see.

Painting counts as a capital improvement if made as part of a much larger renovation. For example, if you gutted an apartment, the painting costs do not need to be separated from the total.

Directly from IRS pub. 523.

The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home.