Question

Does a major home renovation count toward major purchase if it's a service?

Forum|Forum|5 years ago
April 25, 2021
1 reply
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Hello,

We are not itemizing our sales tax deduction but did have a major purchase toward the end of the year. We had the wood floors in our home refinished. There were no materials purchased for the project, but the cost of the project ($10K+) generated a lot of sales tax. I'm wondering if I can deduct the sales tax under the "major purchase" category?

Thanks.

E

ErnieS0

Possibly. Did you do the work yourself? If you hired contractors, they generally deduct the sales tax. The IRS says:

You can claim a sales tax for a major renovation of a home if the tax rate was the same as the general sales tax rate and any of the following applies.

Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation.
You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly.
Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly.

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