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Post by pig on Mar 28, 2011 10:16:04 GMT -5
I was talking to a friend who told me that all your home improvements/repairs you do to your property can be deducted from the sales tax when you sell.
Is that true?
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Deleted
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Post by Deleted on Mar 28, 2011 10:16:35 GMT -5
What state, you handsome devil?
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Post by pig on Mar 28, 2011 10:25:33 GMT -5
Well the friend was from NY but I'm in PA.
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Post by Deleted on Mar 28, 2011 10:43:43 GMT -5
I didn't search for PA, but I don't think there is a sales tax when you sell a house in NY.
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Post by pig on Mar 28, 2011 10:53:34 GMT -5
Maybe he meant some other tax?  |
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Post by pig on Mar 28, 2011 13:07:45 GMT -5
Maybe I'm misunderstanding what he was saying. When you sell a house that counts as income right? Can you then deduct it from your income tax? That might have been what he meant. I have no clue.
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Post by Deleted on Mar 28, 2011 13:58:42 GMT -5
Yes. When you sell a house, you have to claim the income on your 1040 as capital gains. There is currently a $250k exemption for a single person and a $500k exemption for a married couple, if you lived in the house for 2 years.
So if a married couple bought a house for $100,000 and sold it 10 years later for $400,000 they would owe no tax on the transaction.
If a married couple bought a house for $100,000 and sold it 10 years later for $750,000 they would owe capital gains tax on $150,000.
Your friend is correct, in that any capitalizable home improvement that you do (ie. painting does not count) increases the cost basis of your house, thereby reducing the income that is taxed.
For instance, if a married couple bought a house for $100,000 and then remodeled it for $150,000 and sold it 10 years later for $750,000 you would not owe any taxes on it.
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Post by pig on Mar 28, 2011 14:00:55 GMT -5
Ah, great! Thanks Archie for that great explanation I think that is what he meant.
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Post by commentator on Mar 28, 2011 15:07:17 GMT -5
Dr. P, the cost of improvements, including sales tax on materials, adds to your basis in the house. The cost of repairs does NOT add to basis.
If you sell your qualifying primary residence for more than $500,000 ($250,000 if not filing married-joint), then basis becomes important.
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Post by geller on Mar 29, 2011 16:49:34 GMT -5
Im interested in this as well, Im in Florida though.
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Post by commentator on Mar 29, 2011 17:08:07 GMT -5
geller, start a new thread if you have a question. Also, the state of residence is not relevant to the issue of which costs can be capitalized (added to basis) and which cannot.
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