Home Buying in Phoenix>Question Details

Matthew_p, Home Buyer in Phoenix, AZ

As a buyer, how can I recover the cost of "improvements" made to sell a house faster? Ex. new carpet, paint, etc. Are they deductable?

Asked by Matthew_p, Phoenix, AZ Fri Apr 1, 2011

after removal? I'm aware of the psychology behind "putting on a fresh coat of paint" in order to move a property faster in a buyers' market. New carpeting, new tile, paint, and the like make the house seem like a better bargain. I have some specific ideas on how I'm going to decorate after I move in, and "builder's special" carpeting is not one of them. Can I request receipts for these purchases in order to donate any recovered material to Habitat for Humanity for a tax deduction? I don't want to waste the materials, but if I don't like them, they will be torn out.

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13
Matt,
I am not a CPA but I am married to one. This isn't a hard question to answer.

If I hear you right you want to rip out the items in a home you purchase and
put your own in and deduct the value of someone Else's work. Right?

If you send it to HABITAT you will get a receipt for the donated items.
Usually this will be blank for you to fill in the amount....
You have to ask yourself, What is used carpet worth?
If you come up with a number that the IRS thinks is unreasonable than likely you will get a knock on your door for an audit. Not good.

How do you donate paint or tile.. not likely.
Home improvements aren't tax deductible but will change the basis..
(that you will have to chat to your CPA about)

Here is the deal, unless you have a very creative tax accountant and want to skirt the law you might want to look at homes without the improvements and save yourself some grief or realize this is an expense you want to take on .
Have a great day ,
Brad
http://www.Bradbergamini.com
This isn't tax advice go to your CPA.
1 vote Thank Flag Link Mon Apr 4, 2011
Matthew,

Are you buying the home to move into and live in, to rent, or as a "flip" ??? This makes a big difference.

Regardless, Real Estate is an investment. It is a good idea to keep track of all improvements, maintenance expenditures and donations made on any property, even if they are "personal preference” improvements. Who knows what the future may bring. If you turn the property into a rental, you will want this for your records.

Work hand in hand with your tax professional to assure that you are getting the maximum deductions available. Your expenditure records and donation records will facilitate this..

But, please, do not over-improve for the neighborhood. Keep in mind what is standard for the neighborhood and stay within that range. Sometimes, restraint now can mean building up to your dream home. Location, Location, Location is not just a saying - it is a financial reality.

Have fun with your remodel or refinishing, but do it with accountability and knowledge of the neighborhood!
Web Reference: http://www.ProsperAZ.com
0 votes Thank Flag Link Sat Apr 9, 2011
You should seek advise from a CPA.

Totally Agree With Brad.
Only deduct what you give to HABITAT and have receipts for.

Phyllis JC Anderson, GRI
Liberty One Realy
602-316-0115
Web Reference: http://www.YourAzCastle.com
0 votes Thank Flag Link Fri Apr 8, 2011
Hi Matthew,
I would seek the advice of a CPA or tax attorney. Thanks
0 votes Thank Flag Link Sun Apr 3, 2011
Best ask your CPA if those are deductions

However outdated homes, longer on the market have lower offers

Work with Agent for more pricing details what would be required.

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com
0 votes Thank Flag Link Sat Apr 2, 2011
- I can't comprehend why I can't sign a hold-harmless agreement to take delivery of an "incomplete" house.

You can do a lot if you're willing to pay cash. If you're looking to finance, you need to recognize that the Senior Partner in the deal is the Lender, and that the Golden Rule applies.
0 votes Thank Flag Link Sat Apr 2, 2011
If you're planning on paying cash, then all you need to do is find a fixer-upper home, buy it and then do the rehab yourself.

If you're financing the purchase, then there will be minimum property 'conditions' that have to be in place in order to pass an appraisal.

If you're wanting to buy a property that's been rehabbed and then ask the seller to 'eat' the cost of their improvements, then good luck with that!
0 votes Thank Flag Link Sat Apr 2, 2011
If you are looking to purchase an incomplete new build, not going to happen. The builder is required to complete the house. If buying a new build, take the cheapest upgrades and as you said donate them. Don't opt for any tile, as it is more expensive to remove and is not salvageable. Builder cost does not reflect donation value. Talk to your accountant about donations.

There are a few houses on the market that foreclosed during the construction phase. Your agent should be able to help you find these. Most likely will require all cash to purchase.

There are also plenty of foreclosures that have not been fixed up. Again, your agent can help you find these.

Another option would be to have your own custom home built, then you can put in exactly what you want.
0 votes Thank Flag Link Sat Apr 2, 2011
Gentlemen,

Thank you for your replies. I may have misstated my questions previously. I'm not looking for tax information, per se; I'm inquiring as to what can be done about "improvements" that have been done to a property with the sole purpose of making it more marketable - "neutral"-colored carpet and tile, two-tone paint [which I don't quite understand the purpose of], and the like.

I'm trying to purchase a property that's a "blank slate"; that is, clean, mechanically sound, albeit ugly. If new carpet and tile has been installed on an older property, I don't *want* it; I want to put in my own after closing, not deal with somebody else's design choices.

Frankly, I'd want the seller(s) to undo what's been put in... I'm trying to come up with a metaphor here, and I guess the best one is being that since the *location* and *layout* of a house cannot be changed: if a speculation house is on the market, I'd like to buy it... but I don't want the speculative decor; either remove what's been done, or deduct it from the price, because I don't want to cover the margins for somebody else's taste. Feel free to use your cost for the paint and carpet as a deductable "business expense", but I need copies of your receipts, because I'm taking it all out and giving it away, and I want that deduction, too.

I need something to make up for doing twice the work to get the home to my standards.

I know I'm coming off as an a-hole here; call me a 'difficult buyer' if you must. Getting back to the metaphor of a speculation house: I don't want the builder's overpriced garbage - I'm going to put in better, less expensive materials after closing, and I'm not going to pay for yours for 30 years. I can't comprehend why I can't sign a hold-harmless agreement to take delivery of an "incomplete" house.
0 votes Thank Flag Link Fri Apr 1, 2011
You bought the house and paid for these Items. If you give them away and declare a donation amount, the tax cost basis of the house is reduced by the declared donation. If on the other hand you paid for the house at a price which you perceived did not include the future "scrap value " of these items, you would not declare a donation value on your return. Talk to a tax accountant for advice.
0 votes Thank Flag Link Fri Apr 1, 2011
As I discovered the hard way, I put about $500 into a short sale I listed to bring it up to good showing standards and got an offer of $5000 more then expected , yet the short sale bank/investor (actually their Mortgage Insurer ) refused to allow reimbursement of my costs at COE.
0 votes Thank Flag Link Fri Apr 1, 2011
I concur with Carlos, this is a question only a qualified CPA or knowledgeable tax adviser can or should answer. We could offer opinions, however they could prove costly since we are not privy to you financial situation and lack the knowledge of tax codes and law.

If you have a real estate question, many of us would have the expertise to answer those. It is always best to let the experts offer their opinions only where they are qualified.
0 votes Thank Flag Link Fri Apr 1, 2011
Matthew,

That is a question for your accountant. My guess is that when you sell the house you might be able to deduct any expenses incurred to improve it from the proceeds. But I do not think that you can claim any expenses incurred prior to you adquiring the property, especially if you did not pay for them directly. Also remember that the first $250k as a single person, or $500k for married couples, in profits from the sale of your primary residence are tax free.

Remember that the above is just my non-professional opinion, and for more accurate information you should consult and an accountant.

Carlos J. Ramírez, PC, ABR, CNE
RealtorCarlos@gmail.com
Associate Broker/Realtor, HomeSmart -
http://www.SmartAZRealty.com
0 votes Thank Flag Link Fri Apr 1, 2011
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