Am I allowed to deduct for the work done to my house?

I bought a house in 2009 (and got my $8,000 back as a first-time buyer). During this year, I have spent about $15,000 dollars on an architect + lawyer in order to get zoning approval so I am allowed to expand my house. No money has been spent on the actual construction work that will now be done in 2011.

My question is this. Am I allowed to deduct any of the expenses for what I have already done (lawyer, city filings, architectural, permits, etc... fees)? Also, am I going to be able to write-off any costs from the upcoming contruction?

As a side note: I have already installed environment-friendly (EnergyStar) upgrades in the house, so my $1,500 tax credit for that has been used up. What I am asking about is completely separate.

I reside in New York metropolitan area, if this makes any difference.

All opinions are much appreciated!

Reply to
Michael W.
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Is this a personal residence (as opposed to a rental property)? If so, none of this will be write-offable. And neither will the construction expenses. The construction expenses will, however, increase your basis in the house.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

Reply to
Rich Carreiro
[snip]

The legal and architect's fees also add to basis.

Reply to
Alan

Thank you for answering the question. So this means if I bought a house for $600,000 and then spent $75,000 to "improve the house" (documented lawyer, architect, fconstructions receipts) and then one day sell the house for $800,000, I should be paying capital gains on only $125,000 and not on $200,000 ?

Please confirm.

Reply to
Michael W.

Yes and don't forget to deduct the selling expenses from the selling price before computing gain and add to basis many of the closing costs at the time of purchase. See IRS Pub 523 for more details.

Reply to
Alan

Yes, but. Current law allows an exclusion of $250,000 of gain. So the gain you have is too small to be taxed at all. (As with any rules, there are other details, must have lived in house 2 of prior 5 years, etc. BTW - it's $500,000 for couples.)

Reply to
JoeTaxpayer

On Tue, 21 Dec 2010 16:18:29 EST, "Michael W." wrote Re Re: Am I allowed to deduct for the work done to my house?:

That is correct with today's tax laws. Subject to change tomorrow.

Reply to
Vic Dura

Incorrect. He never said the house was his RESIDENCE to which the exclusion applies.

Reply to
D. Stussy

In addition, you mentioned that you had a $1,500 tax credit for energy credits. Don't forget to lower your cost basis by $1,500. So you pay capital gains tax on $126,500. So to summarize the others: selling fees (realtor fees, staging fees, transfer tax) lower your capital gain further; you can get a 250k/500k exemption as someone else mentioned, as long as you lived in the house, etc.

Reply to
removeps-groups

D - in my same response, two sentences later, I made the residency rule clear for any gain exclusion. If you re-read, the tone of his email implies strongly that he lives there. When I own rental property, I never called it "my house" the way he did. Either way, if OP stopped reading my reply after the first sentence, thanks for setting the record straight.

Reply to
JoeTaxpayer

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