Can I get tax deduction on the repair amount $35,000 that I credit or give to Opendoor realestate company?

Forum|Forum|3 years ago
May 22, 2022
2 replies
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I sold a house to Opendoor and on the closing statement, I have to credit or give $35,000 to Opendoor for the future repair of that house. It is part of the deal. Can I deduct this amount on my tax return 2022?

TurboTax Home & Biz Windows

Best answer by TomD8

I wish but according to IRS rule, any home repair can't be tax deductible unless it is an improvement to the home; but in special case of selling the home, the IRS allow you to deduct any repair or improvement but the repair or improvement has to have been done 90 days before your closing date. In my case, at the closing date I have to credit or give $35k to Opendoor for them to repair the house in the future. I believe this is a tough answer. Are you all accountants or CPA?

I agree with @Carl11_2 and @Anonymous_. The repair credit is a sales expense and can be subtracted from your gross proceeds when you calculate your capital gain.

You might find this web reference useful.

https://www.nolo.com/legal-encyclopedia/when-home-sellers-can-reduce-capital-gains-tax-using-expenses-sale.html#:~:text=You%20are%20allowed%20to%20deduct,appraisal%20fees

I am not a CPA or accountant. This is a TurboTax users' forum. I can tell you that most of the users who answer questions on this forum have been doing so for several years and are quite knowledgeable about income tax issues.

Critter-3

This is a repair and is treated just like any other repair even though you used the funds at sale to pay off the contractor. Repairs to a home are not deductible unless they are considered improvements then that is added to the cost basis of the home.

The general principle is that a repair maintains the property in as-is condition or restores it to as-was condition, while an improvement (a betterment) makes the property more valuable or extends the useful life of the building or its sub-systems. The improvement must be a permanent part of the structure (attached to or part of the house).

Paint and wallpaper is a repair, not an improvement. I would say the same about refinishing the floors (as opposed to installing a new floor which is an improvement).

Buying new appliances isn't either a repair or improvement unless they are built-ins.

Remodeling is generally an improvement, and if you do things like painting as part of the remodeling, you count them as part of the improvement cost, you don't have to count them separately as a repair. However, the dehumidifier is not an improvement unless it is permanently attached to or built in to the home.

TomD8

Employee

To put it another way, a seller repair credit is not a deductible expense. The IRS regards it as a reduction in the net gain of the home, thus reducing the capital gain tax the seller might have to pay.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.