Cost Basis on Real Estate?
I just purchased a home that needs quite a bit of work and am considering selling it after I fix I up. I understand that I can add in improvements to my cost basis to reduce any capital gains taxes owed. I have been keeping receipts of everything I buy. My question is can I include everything spent on the house? I.e. appliances, grass, trees, paint, doors that need fixed, carpet, home inspection fees, closing costs. Thanks
Public Comments
- Generally, maintenance type work does not become part of the basis of a capital asset (ie. carpet replacement, repainting etc) However, since you are doing it to resell, you might be able to write it off. I would speak to an accountant, and keep tabs on all costs in the mean time.
- There are different rules for improvements to property that is your primary residence while you are doing it , And property that is strictly investment ( you are living elsewhere ) . And IRS rules change yearly , search for cost basis and real estate . http://www.irs.gov/ good luck >
- It depends on the home's usage. If you buy it as an investment and never live in it, any expenses of improving its condition can be included in the cost basis. This does not include regular periodic maintenance such as lawn mowing, snow removal, fertilizing and treating lawns and shrubs, cleaning the pool. If it becomes your personal residence, only capital improvements such as a new roof, new heating/cooling, new driveway, new fixtures, new cabinets, new doors and windows, new appliances, new flooring or carpeting, landscaping exclusive of maintenance work, all are added to the cost basis for when you sell later on. Painting and assorted repairs are not capital improvements. Closing costs both in the purchase and the sale are part of the basis whether it's investment property or your residence.
