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Hi there,

We bought our house in January and will be hiring a house painter for an exterior repaint. Can we write this off in taxes when we sell the house?

MM
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If this is your personal residence, then no. Household maintenance type items, which would include painting, are nondeductible personal items.

Major improvements can be added to your basis, but not painting and repairs.
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i too am looking to make some house improvements. the proposed "painting" cost - stripping, sanding, painting, etc. - are est at $8000 on a $200K home.

something that large wouldn't be added to cost basis? or more to the point, is there any legal way to change the character of the work to be more than maintenance? it seems maintenance or repairs that are nearly 5% of the house value would be more than a casual personal expense. if it is still personal expense, would the characterization change if the repairs added up to 20% or 50% of the initial cost of the house itself?

for example, if you buy a "fixer-upper", say a broken down shack for $50k, strip the wooden walls and paint, resand and varnish the hardwood floors, and the like...not adding a major addition to the house such as another wing, bedroom or bathroom but otherwise turn the fixer-upper into a like-new, renovated move-in ready home that can be sold for $200k, wouldn't all those "repairs" be added to the cost basis?

just trying to get a feel for where the line is drawn. thanks.
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just trying to get a feel for where the line is drawn.

As usual, if you want clarity you need to seek it outside of tax law. The only easy part is that, for personal-use property, repairs/maintenance have no tax effect and improvements add to the basis.

OP asked about painting the house. To me that's routine maintenance, IOW, it holds the status quo. New vinyl siding (secrets of the Universe and steak knives optional) would be an improvement, at least from a tax perspective. Patching a roof is repair; roof replacement is an improvement.

You mentioned rehabbing. That is an improvement even if individual items in it would be routine maintenance. However, should you take 20 years to do a rehab, as did a friend of mine, subsequent painting, carpeting, etc. would be maintenance.

There's some, but not much, help in IRS Pubs 527 and 551. (Pub 527 is for rental property, but the improvement/repair discussion is valid for all.) My advice to OP would be to keep records of everything and at the time it would matter (when the property is sold or converted to a rental), seek professional advice if there are significant issues.

Phil
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Thanks!

One more question: I understand that carpet replacement would be maintenance but what if you ripped out the carpet and replaced it with hardwood floors?

MM
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I understand that carpet replacement would be maintenance but what if you ripped out the carpet and replaced it with hardwood floors?

I'd call it a capital improvement.

Phil
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<I understand that carpet replacement would be maintenance but what if you ripped out the carpet and replaced it with hardwood floors?>


One of the things not really mentioned in this thread is that your question will likely end up as "much ado about nothing". You should know the area that you are moving into. You should also know what your long range plans are. I would keep records of the various permanent improvements I made, but I would not spend a whole lot of time worrying about it. The 500k exemption on gains for a couple would make much of this debate moot.

If you buy your home for 200k, it would need to sell for 700k before you would even need to take a pencil to paper. In that case if you had put 100k of permanent improvements into the house, you would have to sell it for 800k before taxes would become an issue (since your modified basis would now be 300k). Any costs of selling an 800k house would also lower your potential gain. With a 6% sales commision you would now have to exceed 850k on your sale price before CGs became an issue.

I know that I should include the usual disclaimer that congress always can come in and change the rules again. Still, I think that seeing the larger picture may save you from spending an inordinate amount of time worrying over the tracking of your expenses.


B
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I know that I should include the usual disclaimer that congress always can come in and change the rules again. Still, I think that seeing the larger picture may save you from spending an inordinate amount of time worrying over the tracking of your expenses.

I would expect that Congress WILL change the rules. They have twice in the last 10 years already. Since the general rule for any capital asset is that your gain is your sales price less your adjusted cost basis, you should always be able to determine your adjusted cost basis.

Besides, the current rules don't tell you not to make the calculations. They only state that if the taxable gain is less than $250/500K and you meet certain conditions, you do not have to report the gain.

Ira
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<I would expect that Congress WILL change the rules. They have twice in the last 10 years already. Since the general rule for any capital asset is that your gain is your sales price less your adjusted cost basis, you should always be able to determine your adjusted cost basis.>


This is all true, but I still believe that spending an inordinate amount of time calculating your gains and adjusting your cost basis is a waste of time for most people. In my own case any time spent above zero seconds is too much. I have been in my home about 14 years. To date we have only used about 20% of the CG allowance.

However, there are many cases where people should pay closer attention to this for tax purposes. One example would be if you are in an area where there is a huge expectation of price appreciation. Another would be if you may consider turning the house into a rental property. Yet another would be if you intend to use part of your home as a place of business. Having good records when you sell in any of these examples may be very important.

While it is true that congress has made changes in the law, it has actally gotten a lot easier than it used to be. In the past you would have had to keep track of your cost basis on every home you owned. If you owned 3-4 homes in a 10-15 year period, that could have been a monumental task. Now it is relatively straightforward. I would expect any plan to fundamentally change the current rules would meet with a lot of negative feedback for the tone deaf members of congress who would propose them.

FWIW, I have tracked the costs of my permanent improvements, but not for tax purposes. It is good to be able to know what each project costs for informational purposes. Several friends have shared information on various home projects over the years so that you can get a ballpark idea on the cost of future projects.

Personally, I do not consider ones home to be an investment in the tradtional sense of the word. If I buy a stock it is fairly easy to calculate my annual rate of return. It is much more complicated to try and do that with a home. Most people are math challenged enough or too lazy to bother figuring it out. Owning a home has a lot of associated expenses that go along with it. If you tend to oversimplify things, you can reach some wrong conclusions. If your 100k home has doubled in value in 10 years it would not be accurate to say you have a 100% gain or averaged a 10% annual return. You need to add in the cost of all permanent improvements, repairs, property taxes, mortgage interest, insurance, etc. On the other side you should subtract any benefit you have received from any itemized deductions. In this hypothetical example, the person whose home went from 100k to 200k in value may very well have only broken even or actually lost money.


B
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This is all true, but I still believe that spending an inordinate amount of time calculating your gains and adjusting your cost basis is a waste of time for most people. In my own case any time spent above zero seconds is too much. I have been in my home about 14 years. To date we have only used about 20% of the CG allowance.

Until 1997, you still had to keep track of adjustments to your cost basis. So, if you weren't keeping track of the adjustments before that, you were gambling with a future tax bill. On the other hand, you may have misinterpreted part of my position. I wouldn't spend any time NOW calculating my adjusted cost basis. I would only keep track of the necessary adjustment items by keeping the relevant receipts in a common location. I wouldn't actually calculate anything until such time as I was contemplating selling my property.

Ira
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