Home basis

[Questionguy101]

Supposed you sell your home and part of the gain will be taxable, can the following items be added to the basis of the home?

(1) Carpet job done years ago.

(2) Water Heater.

(3) Central heating system.

Does it matter how old the water heater and the heating system is? By the way, the property has always been your main home so no depreciation has ever been taken from the above items.

[WhiteOleander]

Well, I would say it depends.

The IRS makes you separate repairs/maintanence with improvements. Improvements could be added to basis. But, not repairs.

So, on the carpet, was there carpet they were replacing? If so, that would be maintanence. If it was new carpet, that would be an improvement.

The water heater would be repair/maint. So, not added to basis.

The central heat. Again, did it replace an existing system? That's repair/maint. If it is new to house, then that is an improvement. So, it can go to basis.

I know that most homeowners want to claim even repairs as improvement. Because the new item is an improvement over the old. But the IRS does not look at it that way.

[August @ ADG Financial]

Is a Single or Married person selling the home. Married $500,000. plus the cost of home and inprovements. In Southern Ca. and in a few other area's you might have a problem but in most you should be ok. What's the whole story here?

[S T]

Improvements vs Repair

Publication 523, page 9 has an outline of improvements, plus at the bottome of page 9, improvement no longer part of home.

plus I found the following in an article regarding Home Improvements and adjusting basis.

"If the home improvement is a major replacement, addition or alteration, it probably is an adjustment to the cost basis. If it's a maintenance or repair expense, it usually isn't. The IRS offers some further guidance.

Improvements are expenditures that add life to your home, increase its value or adapt it to a new use. For example, the addition of a bedroom or storm windows would be improvements. So would upgrading the kitchen or replacing an old heating system with a new high-efficiency unit. (Only the extra expense for upgrading, instead of replacing with similar quality, may be added to the adjusted cost basis.) Want to turn your garage into a family room? It's an improvement because it adapts the area to a new use."

Sandy