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Author: KLTolly One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121482  
Subject: Q: Deducting home improvements? Date: 3/28/2009 10:56 PM
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I believe that I have been given bad information - I'm a little skeptical, and can't find anything on the IRS website to support this in any fashion - hoping someone can set it straight for me.

Last year, due to some really outrageous family circumstances, we did nearly $36,000 in improvements to our home in order for our state protective services to allow us to meet regulations to foster my baby niece and nephew. Added bedrooms, upgraded A/C and heating, etc. Nothing so energy efficient or "alternative" so as to qualify us for the "green" credits, though.

A well meaning family member insists that these costs are deductible, and knows people who write these things off annually. I always thought that I had to track these expenses to add to the cost basis of the home for such time that we decide to sell, in order to minimize capital gains. I've carefully monitored and documented all other capital improvements over the last 15 years in this belief.

While I am highly skeptical of taking a massive deduction like this, if there is, in fact, anything to allow this, can someone guide me to the correct publication or reference? I'd hate to leave this on the table if it is legal, but honestly thought this went the way of consumer interest deductions.

TIA

Katina
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Author: YewGuise Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105437 of 121482
Subject: Re: Q: Deducting home improvements? Date: 3/28/2009 11:52 PM
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...costs are deductible, and knows people who write these things off annually...

If you use a HELOC or 2nd mortgage to finance home improvements, some of the interest paid may be deductible.

...add to the cost basis of the home for such time that we decide to sell, in order to minimize capital gains...

Yep.

...I've carefully monitored and documented all other capital improvements over the last 15 years in this belief...

Is this your 1st house? Because prior to 1997 (which is less than 15 years ago), if you sold a house and then bought a more expensive one, you deferred taxes on the gains. So when you sell, keep in mind that you bought under the old rules, and have to include capital gains from the sale of your previous house when calculating your taxes.

In answer to your specific question, whether home improvements are themselves deductible, that's not something I've heard of so will leave it for the experts to comment on.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105439 of 121482
Subject: Re: Q: Deducting home improvements? Date: 3/29/2009 2:27 AM
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I'd hate to leave this on the table if it is legal, but honestly thought this went the way of consumer interest deductions.

More the way of the unicorn. Improvements to your personal residence have not been deductible since at least 1971.

Phil

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Author: Jeanwa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105440 of 121482
Subject: Re: Q: Deducting home improvements? Date: 3/29/2009 7:46 AM
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I'm guessing that rather than deductions for the improvements exactly, they are talking about deductions for costs of the foster care that are not reimbursed which are deductible as charitable contributions.

Here is one article about it.

http://www.nysscpa.org/cpajournal/2007/807/essentials/p38.ht...

"As long as the nonprofit or welfare agency places, monitors, and has the authority to remove the child, the foster parents are not profit-seeking. Payments received from the agency are advances or reimbursements for the cost of care, and, accordingly, are not included in gross income. Similarly, because the foster home is not considered a business, no business deductions (IRC section 162) are permitted. The foster parents are permitted a charitable deduction (IRC section 170) for unreimbursed out-of-pocket expenses incurred for the care of the child. (See Revenue Ruling 77-280 situations 1 and 2.)"

Although the costs of the improvements to your house are unreimbursed expenses of foster care. I really doubt if they are what it talking about.
See publication 526

Foster parents. You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. A qualified organization must designate the individuals you take into your home for foster care.

1. You can deduct expenses that meet both of the following requirements.
They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child.

2. They must be mainly to benefit the qualified organization.


Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. For details, see Publication 501, Exemptions, Standard Deduction, and Filing Information.

Example.

You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. Your unreimbursed expenses are not deductible as charitable contributions.


So if it benefited the state for you to do these improvements they could be deductible. If the children would have been difficult to place and the state convinced you to make the improvements in order to place the children in your home, then I think it would be deductable.

Jean

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105441 of 121482
Subject: Re: Q: Deducting home improvements? Date: 3/29/2009 9:21 AM
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So if it benefited the state for you to do these improvements they could be deductible. If the children would have been difficult to place and the state convinced you to make the improvements in order to place the children in your home, then I think it would be deductable.

If--and that's a big if--the costs described in the OP could be looked at as charitable contributions, I think they'd be limited by the same limitation that applies to capital expenses required by a medical condition. Only that amount in excess of the increased value of the home would be deductible.

Phil

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Author: BrMad Three stars, 500 posts Ticker Guide CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105443 of 121482
Subject: Re: Q: Deducting home improvements? Date: 3/29/2009 12:51 PM
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If one is using the home for business, then a portion of the expenses for re-modeling might be deductible. This would be especially true if the improvements were done in the same area or room(s) that are used in the business.

See form 8829.

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Author: bookie71 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 105444 of 121482
Subject: Re: Q: Deducting home improvements? Date: 3/29/2009 12:54 PM
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I suspect it would be similar to an improvement made for medical purposes - only deductible to the extent the cost is more than the increase in the value of your home.

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