Accountants? Tax question

[skeety]

Any CPA's out there? heheh

Two simple questions regarding tax deductions.

Last year, I dropped roughly $30 grand into home improvements (Has my basement finished, and a gazebo added onto our deck).

Are those expenses in any way deductable? So far, all my research has told me no...not unless I made the improvements to sell my home. But I didn't sell it. Seems to me I should get SOME sort of deduction for that.

Also, (and I'm pretty sure the answer's no)...are wedding expenses in any way deductable?

any help would be appreciated.

[frankandmaura]

I am not a CPA...but the home improvements should be deducted as Capital Improvements...at least thats what I do. It gets depreciated over time from there.

Not sure about the wedding expenses...but for mine...I chalked it up as the first in many years of money spent to keep my wife happy!

[Phishnoob]

Save all those receipts. I know that improvements change the "basis" price of your home which is what the selling price is measured against to get the delta against what capital gains are charged for.

[Rick O]

Unless the law changes between now and the time you sell your house you're probably not going to owe any capital gains tax anyway on your primary residence. Check the link for full details.
http://www.bankrate.com/brm/news/rea...20041018a1.asp

I know that doesn't answer your question but it is relevant.

[skeety]

Originally Posted by frankandmaura

I am not a CPA...but the home improvements should be deducted as Capital Improvements...at least thats what I do.

So Capital Improvments aren't just for businesses?

If the improvement is just to my home, I can claim it under that?

[frankandmaura]

I could be wrong Skeety, but I think you can. I have a 2 family apartment house that I used to live in and I did deduct all of my work on the home, but of course that was a business. I am not sure exactly how it works, but the side I was living on could not have been considered a business because it was not money making...

[Nyles]

A tax advisor is cheap.... No offense but if I was in your shoes, I would setup a quick meeting with one and see if they can help you out.

Normally they will do a quick once over and decide if they can save you money, I think it would be wise to spend a few hundred to save a ton. I also think in your case it depends on if you are going to live in the house for over 2 years or not and pay capitol gains, you need an advisor per your state.

Plus its his name on the line on your paperwork, less likely to get audited.

[frankandmaura]

I agree...A CPA can help a lot as well. I have one here that does my taxes for $125. It is truely a bargain!

[Doug1]

some energy efficient upgrades can yield tax credits, not sure about just general upgrades, if so i have screwed my self again

[mantisfreak]

I'm a CPA.

You should keep track of the improvements should you ever sell your home and have a capital gain. However, no amount of the improvements are deductible....they are personal expenses just like the wedding costs.

FrankandMaura,

You can depreciate improvements on the rental side of your duplex but you are not allowed to capitalize and depreciate them on your personal home side. Take a look at your return....hopefully your accountant only depreciated half of the improvements. If that is not the case, let them know when you meet them this year that a portion of those improvements were not related to rental income.

[frankandmaura]

Thanks Mantisfreak. They did only depreciate the rental side while we were living on the other side...we are now renting out both sides, so I think he is depreciating everything.

So capital improvements can only be on the business?

What do we classify improvements to our own home?

[mantisfreak]

Originally Posted by frankandmaura

So capital improvements can only be on the business?

Yes

What do we classify improvements to our own home?

Phisnoob and Rick O gave the details. It is an addition to your basis. Under current tax law, it's not a big deal because as long as you have lived in your current home for 2 out of the last 5 years, you have to have a $500,000 gain before it's an issue. I.e. You buy a house for $100,000 and you sell it for $650,000. That would be a $550,000 capital gain but each of you gets to remove $250,000 if you lived there 2 years. Now you're down to a $50,000 capital gain. If the improvements (addition to basis) cost $40,000, your capital gain is only $10,000 now. If your improvements cost $60,000, you don't owe any taxes because you've exceeded your capital gain.

Obviously, under current tax law, if you don't have a $500,000 profit, it doesn't matter all that much.

[frankandmaura]

Ok...Thank you!