Question by goosefruit: home improvement and income taxes?
I bought a home in 2005, and just sold it two years later. We made a lot of improvements on the home, to which I kept all the reciepts. Can I use them this year when I file my income tax return, as a deduction? I have been told I can, but I dont really understand how. Also moved and dont have a new accountant to ask yet. Any help would be appriciated. Thanks!
Answer by Judy
No, it’s not a deduction. But if you owe any capital gains tax on the sale of the home, you can reduce the capital gain by the amount of the improvements before figuring your tax. If you owned the home and lived in it as your main home for at least 24 months, then you wouldn’t pay tax on the sale if your gain was under $ 250K ($ 500K on a joint return) and it would be a surprise if you had that much gain in the last two years. If you didn’t own it for a full two years, you can probably take a prorated exclusion of gain if the move was for job reasons or medical reasons, but not if you just decided you wanted to move – if that’s the case and you’ll owe tax on the gain, then you could add the cost of the improvements to your basis before figuring your gain on the sale.
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