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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?

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