The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Home Improvements: What costs can you capita||Date: 11/13/2012 6:05 PM|
|Author: ptheland||Number: 116910 of 122853|
In the pickiest sense, what you include in your basis is determined at the time you sell, not at the time you expend money that is potentially includable in your basis.
So one course of action would be to retain your documentation for all of these expenses so that you have the records you need in case the expense can be included in the future.
However, basis issues is an area that hasn't changed very much over the years. So that might be a bit of overkill in terms of record keeping.
You may be looking through the wrong lens when thinking about what is included in your basis. The issue isn't really whether the expenditure increases the resale value. I prefer to look at it as including everything that you sell.
Arguably, everything you mention might be included in your basis. You bought the home knowing several things would need to be done to it before you put it into service as your residence. Had those been done by the seller, you would likely have paid a higher price for the house and those costs would have been directly included in your basis through the purchase price (as opposed to being separate from the purchase).
I'd include the current flooring costs unless you later replace that flooring with some other flooring. Painting is a bit iffy, as that's generally maintenance. But the lighting, vanity, and baseboards are all something I'd capitalize.
Even some deferred maintenance issues would be something I'd include in your basis. They were necessary expenditures to make the house usable as your residence. Specifically, I would be inclined to include the storm drain as part of your basis. Here, you were not the one to defer the maintenance. That was the prior owner. You simply took care of those deferred maintenance items as part of your overall plan to acquire the residence and prepare it for service. (On the back end of ownership, if you were the one to defer maintenance issues and then take care of them right before selling, I'd probably recommend a harder line on including them in your basis.)
As far as your own research goes, you could do worse than starting with Publication 551: http://www.irs.gov/publications/p551/ar02.html .
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