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My husband and I were discussing the new shed we added to the back yard.

My understanding is that we keep the receipt for the shed, and when we sell the house we add that to the basis and it potentially reduces the tax we owe on the profits of the house.

He thought there was something we did over the next 3 years as it depreciates or something. To me, that sounded more like a rental property.

Please help us clarify.

thanks
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My husband and I were discussing the new shed we added to the back yard.

My understanding is that we keep the receipt for the shed, and when we sell the house we add that to the basis and it potentially reduces the tax we owe on the profits of the house.

He thought there was something we did over the next 3 years as it depreciates or something. To me, that sounded more like a rental property.

Please help us clarify.


If the shed is a permanent addition to the property (it has a foundation or is otherwise fixed to the ground) it would add to your cost basis in your property. If it's just one of those plastic things that you can put up and take down easily, it is probably just personal property and does not add to the basis of your property. If the shed is used for business or rental purposes, it will be depreciated; otherwise, not.

Ira
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I would say it is permanent in that it is very large (12'X36') and would be difficult to move, and a new location might not have room for it. It is levelled, but is not on a foundation or fixed to the ground.

Plus it is painted and roofed to match the house.

It isn't plastic, it is wood. It wasn't assembled by us, it was delivered fully assembled.

Not for business or rental use, it will be used to store hay over the winter, and for garden tools the rest of the time.
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I would say it is permanent in that it is very large (12'X36') and would be difficult to move, and a new location might not have room for it. It is levelled, but is not on a foundation or fixed to the ground.

Plus it is painted and roofed to match the house.

It isn't plastic, it is wood. It wasn't assembled by us, it was delivered fully assembled.

Not for business or rental use, it will be used to store hay over the winter, and for garden tools the rest of the time.


Hmmm. This is an area that I'm not fully versed in. On the one hand, the shed is certainly large enough to be considered a permanent structure and therefore add to your cost basis in the property. On the other hand, I'm not sure whether the lack of a permanent attachment to the ground keeps it separate from your cost basis in the overall property.

I would consult with a tax professional in your area for clarification.

Ira
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On the one hand, the shed is certainly large enough to be considered a permanent structure and therefore add to your cost basis in the property. On the other hand, I'm not sure whether the lack of a permanent attachment to the ground keeps it separate from your cost basis in the overall property.

I would consult with a tax professional in your area for clarification.


Given that we aren't planning to move anytime in the future, would we be safe to save the reciepts that show how much we paid, and deal with it all when we eventually do sell?

Worst case it doesn't go to the basis and I've kept the receipt for nothing?
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Given that we aren't planning to move anytime in the future, would we be safe to save the reciepts [for purchase of shed] that show how much we paid, and deal with it all when we eventually do sell?

Worst case it doesn't go to the basis and I've kept the receipt for nothing?


Yes. That is a prudent course of action.

Ira
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