Tax Question

Discussion in 'Business Operations' started by mtdman, Dec 8, 2004.

  1. mtdman

    mtdman LawnSite Gold Member
    Messages: 3,143

    Yeah, yeah, I know. Ask a CPA. But my accountant is on vacation for the rest of the year. And I know there are some accountant lurkers here.

    Can you deduct home improvements from your personal taxes? And if so, where do you do it?


  2. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Messages: 1,009

    No,unless the improvement was financed via a second mortgage with interest payments.In that case,you can deduct the interest only.
    But,say you add a room with out of pocket money.You can't deduct any of it.
    Same with painting,wallpaper,landscaping,etc.,, You can't deduct something that increases your homes value.
  3. cleancutccl

    cleancutccl LawnSite Senior Member
    Messages: 698

    Do you run your business out of your home? If you do you can deduct the landscaping to your home on your schedule C as advertising. It states in the tax rules that if you use your home as a means of showing prospective customers designs and layouts of landscaping it is deductible in full.
    The personal home repairs are never deductible, but if you choose correctly on what to do and how much you can add the price of the repairs directly to the cost of your home and get the money back when you sell your home.
    If you have a home office you use solely for your business you can deduct any repairs done to it in full.
  4. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Messages: 1,009

    Wouldn't landscaping be considered a permanent improvement,subject to the 39 year non residential real property deduction?Which means you deduct a small percentage of the total cost of the improvement over 39 years?
    Now repairs ARE deductible.Say you have to have your central unit repaired.Take the percentage of area you use for business and multiply that times the cost of the repair.You can deduct that amount.
    Example:You use 10% of your home for business.The central unit costs $700 to repair.You can deduct $70 as a business expense.
  5. tonygreek

    tonygreek LawnSite Gold Member
    Messages: 3,932

    business use aside, nick's correct. the tax advantage to your personal tax returns is when you sell your home and receive the $250k single filer or $500k joint filer profit exemption.
  6. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Messages: 7,672

    Get publication 587 from the site. Generally, you can deduct a business use percentage of the improvements if you qualify for a "home/business" deduction. ( which is not too difficult if you use your home exclusively as you principle place of business) Don't try to deduct landscaping to your home as an advertising expense. If you get audited, they'll disallow it. Take it from an ex tax auditor and CPA.
  7. mastercare

    mastercare LawnSite Senior Member
    Messages: 289

    Okay, if you're not using your home as a business location, you cannot deduct any home improvements. If you are updating certain parts of your home which are used for business, you can. Let's say for example you build a new den to use ONLY for business. You can deduct that, but once you do it once, you have to ALWAYS claim that as business space and not use it for anything else. Finally, if you do a general improvement of the entire house, say for example new insulation, windows, or siding on the whole house, you can deduct a percentage of your expense equal to the percentage of square feet you use for business purpose.

    If none of these are appealing, you can save your receipts, when you sell the home, you simply take your selling price minus original price paid to calculate you capital gains taxes (which are either 5 or 15%, you can thank George W for these lower numbers). You then add the cost of home improvements (your receipts) to your original cost basis, thereby reducing your capital gain from the sale.
    - I'm a financial advisor in my other life. Let me know if your business here in MI would like a reveiw of its health insurance! (my shameless plug)
  8. NickN

    NickN LawnSite Bronze Member
    from Alabama
    Messages: 1,009

    Um, gains taxes are a thing of the past,unless he makes 250,000 off of his home as a single person or 500,000 as a married person.Also,he can't deduct home improvements on his taxes,personal or business.I'll pass on the financial advice.
  9. Fvstringpicker

    Fvstringpicker LawnSite Fanatic
    Messages: 7,672

    Bear in mind that when you start depreciating part of your home you are decreasing its basis and therefore increasing your gain when/if it's sold.

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