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Featured Issue: Big Tax Breaks Benefit Homeowners
Make Capital Improvements Prior to Sale
Smart homeowners plan ahead for the tax breaks they'll realize when they sell. Part of that is appreciating the future value of certain types of improvements, and a little bit of old-fashioned, low-tech record-keeping, when remodeling or making other home improvements.
Here's a list of smart tips:
- Make capital improvements. What kinds of improvements qualify as capital ones? The IRS states expenditures that increase the value or longevity of a home qualify as "capital improvements". Things like a garage, deck or porch. The list can also include a new roof or heating and cooling system, insulation, and built-in appliances. Even a fence, landscaping, swimming pool or addition qualify.
- Improve the basis of your home. The main goal is to offset profits from the sale of your house, by having made qualifying expenditures on improvements that will have raised the basis of your home. For more on understanding what basis is see Tax Resources for Homeowners
NOTE: Repair and maintenance do not qualify as a capital improvement. Nor do painting or wallpapering.
- Save ALL cancelled checks or receipts, even if you don't think the particular improvement currently qualifies. By the time you get around to selling your house, they may, helping to reduce your capital gains taxes!
- Scroll through the IRS section on Basis in the IRS Tax Resources file. It'll give you some good ideas about ways to make capital improvements work for you.