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Are all improvements that I made to my home during the the time that I owned it counted to determine the adjusted cost basis or do I just those made for the tax year?

Forum|Forum|5 years ago
March 26, 2021
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Can I only count improvements made to my home in the tax year that I sold it? Also, does it matter that I already included some of the improvements as a rental expense for the tax year that I began renting out part of my home? I stopped renting out part of my home in 2017.

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Best answer by NCPERSON1

Thanks! I sold my home for 285,000.00 and bought it for $147,000.00.

so I wouldn't waste by time trying to figure out all the improvements. The gain is less than $250,000 so there is no capital gains tax at all.

p.s. and that assumes you lived in it for at least 2 of the last 5 years..... to get the tax free treatment,

N

NCPERSON1

all the improvements since you purchased the house are added to the cost basis in the year of sale....

a few exceptions

- you can't 'double dip' - if you expensed some of the items while the properrty was rented, you can't also add it to the cost basis.

- another form of double dipping, for example, is you owned the home long enough that you replaced the roof twice... you can't add both times to the cost basis.

T

TinkerBell01Author

Thanks so much for your thorough answer! You actually answered another question I had about replacing the roof twice because I did replace it twice. I had expected that you could only count the latest replacement.

O

Opus 17

Employee

@TinkerBell01 wrote:

Thanks so much for your thorough answer! You actually answered another question I had about replacing the roof twice because I did replace it twice. I had expected that you could only count the latest replacement.

Correct, you include permanent improvements that are still part of the property.

Also, regarding double-dipping. It depends on whether you expensed or depreciated the expense. You generally have to depreciate improvements, meaning you add it to the cost basis and then depreciate it yearly. If you took an expense safe harbor, you can't count that towards your cost basis, but if you added it to your cost basis and began taking depreciation, that does add to your cost basis (as well as creating depreciation recapture).