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Saving receipts for home improvement costs so I can adjust cost basis when I sell. Ten years ago, replaced washer & dryer with new Amana washer & dryer. (Assuming if I fixed the old ones, that would be maintenance so cost wouldn't count, but getting nice new ones would count as capital improvements.)

This month, replaced Amana with Maytag Neptune. My question: do the Amana machines still count, or should I subtract them from my running capital improvements total?

Thanks in advance,
Mary
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Saving receipts for home improvement costs so I can adjust cost basis when I sell. Ten years ago, replaced washer & dryer with new Amana washer & dryer. (Assuming if I fixed the old ones, that would be maintenance so cost wouldn't count, but getting nice new ones would count as capital improvements.)

I don't agree that replacing or even upgrading appliances is a capital improvement. They wear out, after all, and replacing or upgrading them doesn't extend the life of the property (as opposed to a new roof).

Phil
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Well, that wasn't the answer I wanted! So OK, trying to understand the logic here. Both roofs and appliances wear out and have to be replaced, so the difference is the effect on "extending the life of the building." Does "the life of the building" mean only the structural integrity, or does it also mean function?

For example, we also replaced our single-pane windows with double-paned. I think that's a capital improvement. Is it? And why or why not?

Any IRS pub available that can provide more clarity?

Thanks.
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For example, we also replaced our single-pane windows with double-paned. I think that's a capital improvement. Is it? And why or why not?

Any IRS pub available that can provide more clarity?



You may be agonizing over something irrelevant. If you are single you get $250K in untaxed capital gains and $500K if you're married. It's only above that you have to prove anything. Pub 523 looks like your guide :
http://www.irs.gov/pub/irs-pdf/p523.pdf

rad
P.S. No way would I consider appliances to be capital improvements.


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Seems to me that Pub 523 answers this very neatly. The cost of the original washer/dryer (assuming they stay in the home when you sell it) are properly part of the basis. When you replace them, the old machines are gone, so they can't be part of the adjusted basis. (See p 10 of Pub 523, right column: Improvements no longer part of home.) So in a sense, what you do is back the price of the old appliances out of the basis and add in the price of the new ones. So new machines could be considered a capital improvement if they were very fancy, modern ones and replaced very basic, older ones. But what you can add to the basis is the cost difference between old and new machines. (This is exactly the example given in Pub 523, except there it's carpeting they're talking about.) And as reallyalldone notes, this whole business may be moot, since you can exclude $250K/$500K of capital gain when you sell, so who cares about a few hundred dollars worth of appliances?

Lorenzo
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Appliances are not considered part of the basis since they are not permanently and integrally attached to the structure. If you sell your appliances along with your home, you have two (or more) sales for tax purposes. You can claim the $250/$500K exclusion on the house if you qualify. The sale of the appliances would be taxable if they are sold for more than their basis, and non-reportable if they are sold for less than their basis.

If you were talking about a central air conditioner, you would be adding to the basis.

Ira
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Mary,
My rule of thumb when trying to determine if an item is a capital improvement or not is this: can I take it with me if I move? If so, then it is not a capital improvement although it may improve my life.

Jenn
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I understand about being permanently and integrally attached - the difference between a built-in dishwasher and a fridge on wheels. So strictly speaking when you sell your house there are two sales, the house and all the other stuff you don't want to take with you. BUT - does anyone really do this? If I decide to sell my house, including washer/dryer/fridge, my ad's going to say: "For sale, $295K, washer/dryer/fridge included." I'm not going to say: "For sale, $294K, and I'll throw in washer/dryer/fridge for another thousand bucks" - even if, strictly speaking, I ought to do that.

Lorenzo
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Ira,

Ok, you win. I actually like japper's rule-of-thumb, which from now on is my rule-of-thumb:
If you can easily take it with you when you leave, it ain't part of the house.

Lorenzo
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Reallyalldone,
Thanks for the link. From IRS Pub 523: "Your home's adjusted basis does not include the cost of any improvements that are no longer part of the home." Examples in 523 also very useful.

BTW, I'm aware of the $500k exclusion. Been here 10 years, plan on staying another 10 at least, so that much appreciation is a real possibility. And I'd rather not wade through 20 or 30 years worth of receipts when I sell, just easier to keep a list as I go.

Whether appliances stay with the house or not varies regionally: when I accompanied my sister on her house-hunting expedition in Chesapeake, VA, I was astonished to see house after house with no washer, dryer, or refrigerator. Here (MD) they always convey. Anyway, having just paid a plumber $600 to hook up my gas dryer (solid pipes), and run the rigid ductwork through a hole in my foundation wall, I consider the dryer to be as permanently attached as the built-in dishwasher or any of my lighting fixtures. So I have to think some more about whether the Maytags are capital improvements. Will save receipts and decide later. Meanwhile, the Amanas are definitely out.

Thanks to everyone for your help!
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Only time I would track these improvements would be if you are considering converting your primary residence to a rental, in the future. Then, the more "accurate" your costs are the better/larger your depreciation amounts will be.

cat
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