The Orange County Register
(October 18, 2005)
Q. What is considered a capital improvement that I can add to the cost basis of my home (for income tax purposes)?
A. Housing Smarts asked Jose A. “Tony” Diniz, an enrolled agent in
I will start by trying to define what are not considered improvements: Replacement of existing items because of use, malfunction, obsolescence, change of personal likes or tastes, etc. Restoration because of damage or destruction caused by flooding, wind or water damage, tornadoes, earthquakes, fires and other natural causes. These could include new roofs, house sidings, driveways, walkways, swimming pools, boundary walls and fences, trees and other floral arrangements, interior structures, furniture and fixtures. Even if these replacements would ultimately increase resale value or enhance curb appeal, they would not be considered “improvements” from an income-tax standpoint.
So what are considered capital improvements? When buying a new house, usually one considers replacement of carpets, cabinets or driveways and walkways, interior and exterior painting, new entry doors … new drapes and other window coverings, new fixtures and new closet doors. They also include new block walls, other types of fencing, grillwork and new gates. New roofs, including structural reinforcement, new paint, both interior and exterior, Texcote, new wallpaper and other wall treatments also qualify. Once you move in, other items can also be considered capital improvements: Room additions, bathroom additions, patios and sunrooms. Swimming pools, decks, barbecue pits, rock gardens, and koi pools. Kitchen remodels, countertops, cabinet replacement or refacing. (Replacing built-in ovens and ranges as part of a remodel could be included.) Bathroom remodels, new shower stalls, bathtubs, wash basins and countertops, including faucets. Garage remodels, including installation of storage cabinets and new garage doors, including openers. New heating and air-conditioning systems. New chandeliers and other lighting systems as part of remodeling. Landscaping, including trees, plants, grass, flowers and other arrangements. Purchase of fertilizers and soil amendments, weed killers, etc., although recurring, could be added cumulatively as improvements.
One final comment: Although an item may increase resale value and/or curb appeal, it would not necessarily be considered an improvement from a tax standpoint. Most major remodels and additions would require county permits and would ultimately result in an increase in your county tax assessment. These, generally, could be considered improvements. In all cases, it is important to keep invoices and related documentation in the event of a tax audit.
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Harrison & Christi Long
"Explore Real Estate" Team
Coldwell Banker
949-854-7747
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