All Forum Posts by: Amjad Farooq

Thanks Bill!

Your input further makes me feel at ease with regards to the need to report improvement costs to the IRS only at the time of sale and not earlier. For some reason, I had believed that I would need to report these in the same tax year that the improvements were made.

Since we are on this subject, I have one more question for you and others on this forum:

Does the above situation change if my primary residence also becomes partly rental -- in other words, I may rent out half of the house and have the other half to myself as my primary residence. In this case, do I need to report the improvement (not repair) costs on the rental half of the property to the IRS in the year in which the improvements are made?

I got it. You guys are awesome! You made it so simple for me to understand my situation.

Thank you so much.

Let me also add that I will most probably rent out half of this property (which is my principal residence) and live in the other half myself. Does the situation change now?

Thanks again, Greg.

But, now I am somewhat confused. 

This is indeed my primary residence and I could see myself living there for the next 10-20 years if not longer. I bought the property with cash for $100K in 2014 and I spent another $50K in remodeling costs. So, the adjusted cost basis of my property is $150K at this time.

Should I report the $50K remodeling costs on my tax returns or not? This is not a deduction. It would be to ensure that the the adjusted cost basis of my property is recorded with the IRS, so that when I sell it (say in 10 years), I am able to lower my tax burden on any capital gains on the sale price. Or, are you saying that this $50K will depreciate to zero anyway over the next 10-20 years. So why bother report it to the IRS?

Thank you, James!

So you are saying that if this is my primary residence (which indeed it is and I could see myself living there for the next 10-20 years if not longer), it is probably best not to report remodeling costs ($50K) on my tax returns (as its effect on the overall adjusted cost basis of the property will depreciate to zero over 10-20 years) -- and that if I did, it would just be a hassle as it could open me up for an audit by the IRS?

Matt, 

Thanks very much!

That was a detailed response and very clear. I indeed bought the house to live in not to sell anytime in the foreseeable future.

Thank you, Greg!

That was helpful but I believe I need to report the remodeling costs now not when I sell as advised by Matt.

Thank you, Gabe!

But you did not answer my question: when do I need to report the purchase to the IRS? Now? Or when I sell the property?

Hi everyone,

I purchased a house with cash for $100K in 2014. I spent another $50K to remodel this house. Do I need to report the following to the IRS on my 2014 tax returns?:
(1) Purchase of this house for $100K
(2) Another $50K remodeling costs
(3) If I do not need to report either [1] or [2], how and when do I increase the cost basis of my house in order to reduce my tax burden when I sell it (say for $500K)?

Thank you!