I Have a Real Estate Tax Question...
February 17, 2011 5:00 PM Subscribe
A real estate/math/tax question. I sold my house for $210,000. The buyers wanted a new roof but wanted that included in the loan so the sale price was changed to $217,000 and the $7000 for the roof was paid out of escrow. When I do my taxes next year do I need the receipt for the roof or do the buyers? I believe that since I technically paid for the roof, the cost of the roof could be used to offset the capital gains on the house. What do you think?
Response by poster: Before. It needed to be finished before the appraiser would sign off on the higher cost of the house.
posted by MsKim at 5:12 PM on February 17, 2011
posted by MsKim at 5:12 PM on February 17, 2011
Because we're talking about potentially several grand in tax liability here, this is totally worth paying a real accountant to figure out.
posted by valkyryn at 5:49 PM on February 17, 2011
posted by valkyryn at 5:49 PM on February 17, 2011
You probably know this and it doesn't apply (the house was an investment house or something), but to make sure: if you meet requirements (like it being your primary house for 2 years and not having another sale where you claimed an exception in the past 2 years), you can exclude up to $250,00 gains if single and $500,000 gains if married. So a sale of $217,000 wouldn't be subject to any capital gains. Relevent section in IRS publication 523.
posted by skynxnex at 6:35 PM on February 17, 2011 [1 favorite]
posted by skynxnex at 6:35 PM on February 17, 2011 [1 favorite]
Yes, as far as I know, the cost of the new roof is part of the capital cost of the house. But I'm not a tax accountant. You should ask yours.
posted by kindall at 6:38 PM on February 17, 2011
posted by kindall at 6:38 PM on February 17, 2011
Huh? You increased the sale price of the house, and you paid for the work pre-sale (as a condition / in order to sell it). So of course you paid for it, and should thus have the receipt to use for the house's cost basis.
Is the issue that the buyers now want a copy of the receipt or something? If they are, it's basically because they are looking to cheat on their taxes, knowingly or otherwise ... although I'm not really sure how it would help them since a new roof isn't, to my knowledge, directly tax-deductible. All they'd be doing is tracking it for their eventual capital gains calculation when they eventually sell the place, and even that doesn't work because the work was already included, as far as they're concerned, in the price they paid — so using it this way would be double-counting the work.
I can't come up with any reasonable argument where you wouldn't get the receipt and use it for decreasing your capital gains tax liability (assuming, of course, that you have to pay capital gains tax at all).
posted by Kadin2048 at 11:45 PM on February 17, 2011
Is the issue that the buyers now want a copy of the receipt or something? If they are, it's basically because they are looking to cheat on their taxes, knowingly or otherwise ... although I'm not really sure how it would help them since a new roof isn't, to my knowledge, directly tax-deductible. All they'd be doing is tracking it for their eventual capital gains calculation when they eventually sell the place, and even that doesn't work because the work was already included, as far as they're concerned, in the price they paid — so using it this way would be double-counting the work.
I can't come up with any reasonable argument where you wouldn't get the receipt and use it for decreasing your capital gains tax liability (assuming, of course, that you have to pay capital gains tax at all).
posted by Kadin2048 at 11:45 PM on February 17, 2011
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posted by shiny blue object at 5:04 PM on February 17, 2011