Home improvements to reduce profit from home sale?

You are correct, paint doesn't count (toward home improvement cost). I don't see why permanent light fixtures would be excluded. If you upgraded from a 49 cent pull chain to a $750 chandelier in a dining room, and that fixture is a ceiling mount (i.e. permanent) that is an improvement. JOE

Yes, improvements can reduce the profit. However, assuming this is your primary residence, you can have a profit of up to $500,000 (married couple) without incurring any tax liability. There are things that can complicate this - like having deducted home-office expenses or prior rental of it - but generally none of the gain is taxable up to the $500,000 limit.

Yes, the cost of improvements increase your basis in the home and reduce your realized gain.

Right.

If the home has been your primary residence and you have owned it for 2 of the 5 years ending on the closing date you can exclude up to $250,000 of gain ($500,000 on a joint return where the spouse meets the 2 of 5 primary residence test).

Actually, you would use them to increase your _cost basis_ ... which will also reduce your net profit on the transaction.

You've got the basics right: Maintenance expenses are not to be included as "improvements" ... but additions or upgrades are OK. See Pub 17, Chapter 15, "Selling Your Home" or Pub 523. Bill

Your adjusted cost basis is used to calculate gain or loss. Those new kitchen cabinets add to your adjusted cost basis.

__ Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH

Did you look in IRS Pub 523?

Theoretically, increasing your adjusted cost basis (by accounting for these improvements) would reduce your taxable gain. But...only if your gain is over $500,000. Anything less will be excluded by Sec 121 treatment

You've got the right idea. See Pub 523 for more examples.

The difference between an improvement (which you can add to your basis) and a repair (which you cannot deduct) is basic. An improvement adds to the value of the property or extends its useful life. A repair only restores value or useful life which has been impaired. That said, it isn't always easy to distinguish between adding value or restoring it. A new floor in the bathroom can be either, for example; replace a linoleum floor with new linoleum would be a restoration, a ceramic tile floor, on the other hand, would be an improvement. The one only restores the value and life lost by use over time; the latter not only restores that value but adds new value because the materials have been upgraded. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

I've been looking for a place to insert this comment and this seems as good as any: If you are doing improvements yourself and are buying materials at Lowe's, Home Depot, or similar building supply stores, be sure to make photo copies of your store receipts as soon as possible. The itemized cash register receipts from many of these stores, printed on thermal paper (or some similar process), have a tendency to rapidly fade to illegibility. When you get around to computing your basis, you likely won't be able to read the original receipts. Learned this the hard way!